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FOMC meeting in June: Will the interest rate rise or drop?
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On May 25, the U.S. released a 1.3% GDP growth rate for Q1 of this year, GDP growth slowdown, and PCE rose by 4.2% annually. The inflation r もっと見る
On May 25, the U.S. released a 1.3% GDP growth rate for Q1 of this year, GDP growth slowdown, and PCE rose by 4.2% annually. The inflation remains well above the target level. After ten consecutive meetings with rate hikes, the U.S. faced bank failures and increased the cost of credit throughout the economy. In the end, nonfarm payrolls increased by 339,000 in May, and the unemployment rate rose to 3.7% from 3.4%. These indicators have increased uncertainty about whether the FOMC will continue to raise rates in June.

The dilemma of interest rate adjustments
Rate hikes and quantitative tightening have been the Fed’s essential tools in its struggle to get inflation under control without tipping the U.S. economy into a recession. The Q1 2023 GDP growth rate of 1.3% can be attributed primarily to the decline in private inventory and nonresidential fixed investments. However, as the Federal Reserve steadily increases interest rates, people fear that a recession will remain inevitable in the coming months. While higher interest rates might be bad for borrowers, they’re great for anyone with a savings account.

If the Fed raises interest rates again, it could negatively impact individuals with outstanding loans, reducing the dollar inflows in the market, and existing stock and bonds will decline in price. On the other hand, prematurely cutting interest rates could lead to persistent inflation, forcing workers to pay more for housing and food. However, the current strength of the US dollar also plays a crucial role in the Fed's decision-making process when it comes to cutting rates. For all investors, striking the right asset allocation among stocks, bonds, and cash is the best way to mitigate the impact of rising rates.

Q:
1. How the Fed's rate hikes slow the economy and impact you?
2. What's your investment strategy as rate hikes and a strong USD return?

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