Fed: a lower path but a higher terminal rate?

Last week Jerome Powell, Chairman of the Federal Reserve gave a speech at the Brookings Institution, he suggested that a slower pace of rate hikes might be more appropriate going forward. The market rallied on the news and yields dropped. However, he also reiterated that they are not yet done with rising rates and they are keen to keep financial conditions tight for some time.
Going forward, inflation will likely dictate the pace of hiking, while the labour market will influence the terminal rate. As money supply slowed down significantly, inflation will likely continue to trend lower leading the Fed to opt for less aggressive rate hikes. However, risks remain around the terminal rate as the labour market continues to look strong.
Expect smaller rate hikes, but be mindful the Fed will likely push the terminal rate higher.

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

Carlo Putti

Job Title: Investment Director

Specialist Subjects: Macroeconomics and IG credit

Likes: MotoGP, Football and Italian pizza

Heroes: Valentino Rossi, Steve Jobs and Donald Duck

View profile
Blast from the Past logo Blast from the Past logo

17 years of comment

Discover historical blogs from our extensive archive with our Blast from the past feature. View the most popular blogs posted this month - 5, 10 or 15 years ago!

Recent Blogs