Moving Forward: The Economy in 2023
On Wednesday, December 14, the Federal Reserve raised the federal funds rate target range by 0.5 percentage points.
According to the statement, this isn’t the last hike we’ll see.
Harvard finance professor Mihir Desai predicts: “The final push toward sustainable inflation levels will require a longer period of sustained higher rates than people imagine. Said another way: Getting to 4-5% inflation will happen by May 2023, but getting back to 2%-3% inflation will take longer and be more painful…”
Easy money has been the market’s expectation since the Fed cut interest rates and turned up the dial on quantitative easing on the heels of the 2008 housing crisis. This long-term tightening of monetary policy means a new market reality for all of us. What exactly that means has yet to be revealed. Regardless, we think it prudent to make conservative financial bets as we plan for 2023.
As Fed chair Jerome Powell said last week, "There will be some softening in labor market conditions. I wish there were a completely painless way to restore price stability. There isn't.”
To be specific, an article in Axios highlights changes in predictions for 2023 concerning unemployment and GDP growth.
According to Axios: “The median Fed leader now expects a jobless rate of 4.6% by late next year, up from 3.7% now...”
This would represent thousands of jobs lost over the next year.
While anxiety may be a normal response to this type of news, we know that God is at work for our good. The apostle Paul learned the secret of contentment despite all challenges. That same secret is available to each of us if we make the time to seek God in prayer.
“I do not say this because I have been in need, for I have learned to be content with whatever I have. I know how to live with little, and I know how to live with plenty. In any and all circumstances, I have learned the secret of being well fed and of going hungry, of having plenty and of being in need. I can do all things in Him who strengthens me.”
