Financial Insights

Fed and Bond Investors Face a Rude Awakening

The Federal Reserve projects three interest rate hikes next year, although the market is priced for fewer.

 Yet, recent public statements by senior central bank officials suggest some disagreement over the causes of the recent moderation in inflation. That means policy makers might be reluctant to continue raising rates beyond the Open Market Committee meeting this week without evidence that inflation is moving more decisively toward the 2 percent target. So, it is not surprising that markets are priced for fewer policy actions and that the yield curve implies investors expect rates to remain low for some time. These views indicate that bond investors and Fed officials are in for a rude awakening , as it is very likely that higher inflation lies ahead.

The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.


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