Consumer spending habits are going to change drastically.” “But the Fed doesn’t control the price of oil and gas. “We had hoped that we had reached peak inflation,” said Jay Woods, chief market strategist at DriveWealth. And unless the Fed can somehow broker a peace deal between Russia and Ukraine, good luck seeing any relief at the pump anytime soon. Others worry that big rate hikes from the Fed aren’t going to help bring down inflation, especially since a big chunk of higher prices are due to surging energy costs. There is no doubt that the Fed waited too long to react to inflation,” Villere said. “We’ll see if the Fed can pull off this magic trick and have a soft landing instead of a crash landing. There is no guarantee that the Fed can slow the economy without causing a recession. But he conceded that investors have to tread cautiously. Villere said that bonds and some small-cap US companies are looking attractive. “The market overreacted and that is giving us opportunities to buy some things.” Investors are probably expecting an overly hawkish Fed,” said Sandy Villere III, a portfolio manager with St. “Quantitative tightening is definitely going to push long-term rates higher and I don’t think the market is factoring that in. How the Biden WH predictions about inflation are biting back now That could be another reason why fears of multiple big rate hikes from the Fed could be overdone. This should, in theory, push long-term yields higher. Now, the Fed is unwinding some of these assets by letting bonds on its balance sheet mature and not reinvesting principal payments back into those bonds. This so-called quantitative easing has pushed the Fed’s balance sheet to an unwieldy size of nearly $9 trillion. Here’s how that works: As part of the Fed’s 2020 Covid stimulus efforts, the central bank bought massive amounts of bonds and mortgage-backed securities. The Fed has begun a process called quantitative tightening, which could slow consumer demand by pushing long-term interest rates higher. Still, not everyone thinks the Fed has to be that aggressive. Economists at Barclays wrote Friday that it “is a close call” as to whether the Fed hikes rates that much in June or July. In fact, traders are now pricing in a more than 40% chance of a three-quarter-point hike at the Fed’s July meeting. To be sure, a pause seems less likely after the hot inflation report for May. There is a lag between when higher rates are announced and when they actually slow consumer spending. Treasury secretary concedes she was wrong on 'path that inflation would take'īut Lowenstein acknowledged there is a growing debate as to whether the Fed should slow down the pace of rate hikes, or even pause for a meeting, later this year to assess the impact of higher rates on the broader economy. President Joe Biden, Chairman of the Federal Reserve Jerome Powell, and Treasury Secretary Janet Yellen hold a meeting in the Oval Office.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |