By Sabrina Karl

On Wednesday the Federal Reserve announced yet another 2022 rate hike. It’s the sixth one this year, and the fourth massive one in a row. So how much higher will they go?

The only known answer is that no one, in fact, knows. Not even the Fed. That’s because rate decisions are made one-by-one, about every 6-8 weeks, based on the latest economic data.

When the pandemic took hold in March 2020, the Fed dramatically dropped the federal funds rate to zero, and held it there for two years. But when inflation spiked early this year, they kicked off a series of hikes in March.

The first 2022 increase was by a quarter percentage point. But in May, they doubled the hike to 0.50%, only to go even further in June with a 0.75% increase. They’ve since implemented three more massive hikes of 0.75%, with last week’s being the fourth.

That takes the federal funds rate to 3.75% compared to the pandemic’s 0%, and is why what you can earn on savings, money market, and CD accounts has bolted higher. On the flip side, it’s also catapulted interest rates on short-term borrowing like credit cards.

While no one knows how far the Fed will go, they have signaled they’re not don. And you can see the odds the financial markets place on different increase amounts. As of this writing, the CME FedWatch Tool indicates a 57% probability that the December hike will be 0.50%, with a 43% chance of another 0.75% increase.

Note that these forecasts change daily. Still, it’s interesting to see what the odds-on favorite is for the ultimate 2023 peak. Currently, the most common bet is that the Fed will stop when it reaches 5.00%, or 1.25% higher than last week’s announcement. But only time will tell.