Hawkish Times

Last week there was an important Federal Open Market Committee (FOMC) meeting where the Fed announced a rate hike of 75-basis points. Although this move was not a surprise, it’s still historic: we’ve not seen a rate hike of this size since 1994. What we can take from this decision is that the central bank is steadfast in its commitment to lower inflation (which is currently at 8.6%) by tightening financial conditions and cooling the economy. In other words, the Fed has become substantially more hawkish. The bottom line for financial markets is that we can anticipate continued rake hikes until inflation falls more in line with the Fed’s 2% target. Unfortunately, we’re still in the early stages of this journey. In the meantime, we will likely continue to experience turbulence in fixed income and equity markets. In the week ahead we will be tracking data points on industrial production and existing home sales.

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