Central Banks Walk A Narrow Path Between Growth And Inflation
With a 40-year high in inflation, the Fed raised its benchmark interest rate by half a percentage point on Wednesday. Additional half point increases are expected in June and July with the market expecting rates in the 2.75%-3% range by year end, from a range of 0.75%-1% today.
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The Economy Is Still Strong
Despite a stable economy, public sentiment continues to trend downward. According to recent data, consumer confidence witnessed a significant drop in February, marking the largest decline since 2021.
Inflation Is Sticky
Achieving a decisive victory over inflation is turning out to be more elusive than previously anticipated, presenting a significant challenge for central banks worldwide and casting doubt among markets.
Yield Curve Inverses And Fed To Hike Rates
On Wednesday, the spread between the 2-year Treasury yield and the 10-year Treasury yield increased to its highest point since 2000. The spread increased following the U.S.' consumer price index release which reported an inflation of 9.1% year-on-year in June.
Higher Inflation And Rates Hikes Ahead
Russia's invasion of Ukraine is likely to raise inflation according to Jerome Powell, which would be a blow to the Fed's predictions of easing pricing pressures in the coming months.