As inflation climbs, the Fed reacts.
At its June meeting, the Federal Reserve confirmed what many of us have suspected for some time: prices are rising. In fact, prices are climbing faster than many expected. In response, the Fed raised its inflation expectation to 3.4%, up from its March projection of 2.4%, effectively raising its inflation expectation by 42%.1
The Fed’s course correction on inflation expectations and planned interest rate hikes unsettled the financial markets, with further volatility felt after St. Louis Fed President James Bullard said that the first interest rate hike could be as soon as 2022.2
The Fed also indicated that two interest rate hikes in 2023 were likely, despite signals last march that rates would remain unchanged until 2024.3
So, what’s an investor to do?
It’s important to remember that inflation is just one of the factors considered when creating a portfolio. If inflation trends higher than expected for some time, adjustments may need to occur.
Fed Chair Jerome Powell also said at the June meeting that he believes that inflation will be transitory. But as evidenced by the recent changes, the Fed remains ready to update its outlook as economic data continues to accumulate.
If you’re concerned about inflation, please reach out. As the economy continues to strengthen, economic trends and themes are evolving quickly. We’d welcome the chance to hear your thoughts.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1. The Wall Street Journal, June 16, 2021
2. StLouisFed.org, June 18, 2021
3. The Wall Street Journal, June 16, 2021