Skip to Content
Stock Analyst Update

Fed Sees Rate Hikes Likely by 2023

We expect to update the rate outlook in our banking models to incorporate rate hikes.

In its latest statement, released on June 16, the Federal Open Market Committee unsurprisingly held the federal-funds rate at 0.0%-0.25%. Nobody expected a change in rates this meeting; however, there was some anticipation regarding the potential for new commentary around the tapering of asset purchases and around updates to the dot plot and the Fed’s outlook on future rate hikes. Updates to the dot plot were the biggest change, with the median federal-funds rate projection now being 60 basis points by 2023 versus 0 basis points from the last release back in March. In other words, the median FOMC participant now expects roughly two rate hikes by 2023 versus the expectation of 0 rate hikes from the FOMC’s previous release. This is a material change in the outlook, and we expect to update the rate outlook in our banking models to incorporate rate hikes starting in 2023. This is a bit earlier than we previously expected. We expect this to increase the fair value estimate for our traditional U.S. banking coverage by a low-single-digit percentage.

There were still no hints at tapering in the release, and we don’t expect any tapering until the economic recovery is well on its way, at least for a couple more months--and we expect that any actual tapering will be telegraphed well in advance. We’ll have a better feel for if the Fed is “talking about talking about tapering” once the minutes from the Fed’s meeting are released in early July.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.