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July FOMC Meeting: Maintaining a Hawkish Course
Thursday 28 July 2022
Investment Talks
July FOMC Meeting: Maintaining a Hawkish Course
July 2022 | In a widely expected move, the US Federal Reserve hiked the fed funds rate by 75bp to 2.25-2.50%, its second consecutive 75bp rate hike. The fed funds rate is within the 2 to 3% range of estimates of the long-term “neutral” rate. However, as Chair Powell reminded us during his press conference, policy needs to go beyond neutral into restrictive territory this year in order to reduce inflation.
01 | On 27 July, the Fed hiked rates by 75bp to 2.25-2.50%, its second consecutive rate hike, bringing the Fed fund rate closer to its estimates of the neutral rate.
02 | The US entered into a technical recession as Q2 GDP contracted 0.9%, led by a visible deceleration in domestic demand.
03 | Importantly, the sharp US GDP deceleration was not completely a result of Fed tightening but was caused by other drags on US consumers.
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Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of July 28, 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.
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Investment Talks
Is it Time to Add Duration to Fixed Income Portfolios?
The real federal funds rate must be positive—one indicator of restrictive financial conditions--in order to control inflation. The market is anticipating a positive real federal funds rate in late 2023, suggesting that now is an appropriate time to add duration to fixed income portfolios, and that a 60%/40% equity/bond allocation is appropriate for prudent investors.
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