Questions and Answers
How does the Federal Reserve view inflation and economic growth?
The Federal Reserve views inflation as needing to be slowed over time in order to ensure longer-term economic sustainability, and views economic growth as being of secondary importance.
What is the expected terminal rate by the first half of 2023?
The expected terminal rate by the first half of 2023 is 5% or higher.
What does the Fed recommend investors do to diversify their portfolios?
The Fed recommends investors consider a greater allocation across alternative investments that go beyond broad asset classes in order to provide an additional layer of diversification.
Study Notes
- The Federal Reserve reiterated its view that policy must be 'sufficiently restrictive to return inflation to two percent over time.'
- Markets continue to worry that future Fed hikes will significantly hurt economic growth, but the Fed continues to prioritize slowing inflation over economic growth, which will lead to longer-run economic sustainability.
- We expect the inflationary outlook to remain strong, pressuring policy rates to move higher and stay at those levels longer.
- Our view remains that while the pace of additional rate hikes is in flux, the terminal rate is expected to be 5%+ by the first half of 2023.
- We believe investors should also consider a greater allocation across alternative investments that go beyond broad asset classes and can provide an additional layer of diversification.
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