Why the Fed keeping rates higher for longer may not be such a bad thing

With the economy humming along and the stock market, despite some recent twists and turns, hanging in there pretty well, it's a tough case to sell that higher interest rates are having a substantially negative impact on the economy.

So what if policymakers just decide to keep rates where they are for even longer, and go through all of 2024 without cutting?

It's a question that, despite the current conditions, makes Wall Street shudder and Main Street queasy as well.

"When rates start climbing higher, there has to be an adjustment," said Quincy Krosby, chief global strategist at LPL Financial. "The calculus has changed. So the question is, are we going to have issues if rates remain higher for longer?"

The higher-for-longer stance was not what investors were expecting at the beginning of 2024, but it's what they have to deal with now as inflation has proven stickier than expected, hovering around 3% compared with the Federal Reserve's 2% target.

Recent statements by Fed Chair Jerome Powell and other policymakers have cemented the notion that rate cuts aren't coming in the next several months. In fact, there even has been talk about the potential for an additional hike or two ahead if inflation doesn't ease further.

That leaves big questions over when exactly monetary policy easing will come, and what the central bank's position to remain on hold will do to both financial markets and the broader economy.

Krosby said some of those answers will come soon as the current earnings season heats up. Corporate officers will provide key details beyond sales and profits, including the impact that interest rates are having on profit margins and consumer behavior.

"If there's any sense that companies have to start cutting back costs and that