A close up of a logo Description automatically generated

Fed Hikes 75bps, Data-Dependent Going Forward

3.5% Fed Funds Target by December 2022


As always, the Fed meeting provided something for everyone! The market expected and accepted the 75bps increase and is encouraged by the Powell-led Fed’s ability to pivot to a data-dependent stance going forward. Powell also reconfirmed 3.5% as the target Fed Funds level for the end of 2022 and acknowledged the pace of increases will slow at some point in the future. Powell does not believe we are currently in a recession and still has confidence that a recession may be avoided.

Details from Today’s Fed Meeting and Press Conference:

  • The Federal Reserve raised rates 75bps to 2.5% in a unanimous decision.
  • Powell declared the Fed Funds level is currently at neutral, but they will need to take the level to moderately restrictive.
  • Powell reconfirmed the Summary of Economic Projections forecast at 3.5% on the Fed Funds Rate by YE 2022.
  • The Fed remains focused on inflation risks, and recognizes demand is indeed slowing, but is encouraged by the labor market strength.
  • Fed to be data-dependent going forward and stated it is likely appropriate to slow rate increases at some point.
  • Powell does not believe we are currently in a recession.


June 2022 Summary of Economic Projections

Table Description automatically generatedSource: Federal Reserve, 6/15/2022


What’s Next?

  • Jackson Hole will be held August 25-27 and is a great platform for the Fed Chair to communicate with markets.
  • We have two rounds of employment and inflation reports ahead of the September FOMC meeting.
  • The Fed believes Monetary Policy is working to slow demand but acknowledges that it works with a lag. The next two months will give them further evidence as to how the mechanism is filtering into the economy.
  • We are watching interest rate probabilities and the 2-yr Treasury for signals that the Fed is nearing the end of the hiking cycle.

U.S. Interest Rate Probability

Graphical user interface, chart Description automatically generated

Source: World Interest Rate Probability, Bloomberg, 7/27/2022


2-yr U.S. Treasury vs. Fed Funds Rate

Chart, histogram Description automatically generated

Source: Bloomberg, 7/27/2022


We are encouraged by the Fed’s willingness to shift to a data-dependent stance going forward and will utilize Powell’s playbook from the previous cycle as our guidepost.




Let’s talk – Smith Capital Investors

Our mailing address is:

Smith Capital Investors

1430 Blake Street

Denver, CO 80202







The opinions and views expressed are as of the date published and are subject to change without notice of any kind and may no longer be true after any date indicated. Information presented herein is for discussion and illustrative purposes only and should not be used or construed as financial, legal, or tax advice, and is not a recommendation or an offer or solicitation to buy, sell or hold any security, investment strategy, or market sector. No forecasts can be guaranteed, and the author and Smith Capital Investors assume no duty to and do not undertake to update forward-looking predictions or statements. Forward-looking predictions or statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results could differ materially from those anticipated in forward-looking predictions or statements.

Any investment or management recommendation in this document is not meant to be impartial investment advice or advice in a fiduciary capacity and is not tailored to the investment needs of any specific individual or category of individuals. Opinions and examples are meant as an illustration of broader themes, are not an indication of trading intent, and are subject to changes at any time due to changes in the market or economic conditions. The information presented herein has been developed internally or obtained from sources believed to be reliable; however, neither the author nor Smith Capital Investors guarantees that the information supplied is accurate, complete, or timely, nor are there any warranties with regards to the results obtained from its use.  It is not intended to indicate or imply that any illustration/example mentioned is now or was ever held in any portfolio.


Past performance is no guarantee of future results. As with any investment, there is a risk of loss. Investing in a bond market is subject to risks, including market, interest rate, issuer, credit, inflation, default, and liquidity risk. The bond market is volatile. The value of most bonds and bond strategies are impacted by changes in interest rates. The return of principal is not guaranteed, and prices may decline if an issuer fails to make timely payments or its credit strength weakens. High yield or “junk” bonds involve a greater risk of default and price volatility and can experience sudden and sharp price swings.

Please consider the charges, risks, expenses, and investment objectives carefully before investing. Please see a prospectus, or, if available, a summary prospectus containing this and other information. Read it carefully before you invest or send money. Investing involves risk, including the possible loss of principal and fluctuation of value.

All indices are unmanaged. You cannot invest directly in an index. Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, and other expenses, which would reduce performance.

This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission from Smith Capital Investors.

Smith Capital Investors, LLC is a registered investment adviser.