Our forecasts of the peak Fed rate and recession likelihood remain unchanged
We continue to expect the Fed to ultimately raise its current 4.5% policy rate to 5.5%–5.75% and leave it there through at least the end of 2023. We've recently increased our view for the European Central Bank's terminal rate, to a range of 3.75%–4%. The ECB's March 16 action lifted its key rate target to 3.0%.
We also continue to expect mild recessions in major developed economies, including those of the United States, the United Kingdom, and the euro area, in 2023.
Vanguard Global Chief Economist Joe Davis said financial stability is apt to prevail and the Fed likely will pause its course of interest rate hikes before year-end.
"But financial stability does not preclude financial market volatility," Davis said. "As we noted in our economic and market outlook this year, bringing inflation down was never going to be easy."