Stubborn inflation! Failing banks! Tight labor market! Ups and downs in the stock market!
Jerome Powell and the Fed found themselves in a tough position as they met for their 2nd meeting of the year earlier this week.
My name is Colin Bernd, a Client Relationship Manager at Advent Partners here to provide a brief update on the market.
The big focus this week was to see how the Fed would navigate conflicting interests that have developed in the past several weeks.
From one perspective, they should keep raising because inflation is still too high and the labor market is too tight.
But from another perspective, they want to make sure they don’t do anything to put more stress on the banking system. The recent bank failures, which you have probably seen in the news, have put a spotlight on the industry’s ability to manage interest rate risk as they have raised rates significantly in the past year.
When you stop and think about it created a kind of a no-win situation, there was not really a right solution.
The markets waited in anticipation to see if it would be a 50-point increase, 25 points, pause in hikes. Some even thought a rate cut could be on the table.
Ultimately, they decided to hike rates for the 9th consecutive time by 25 basis points. The Fed funds rate is now at the highest level since 2007.
The Fed also indicated that they expect that we are near the end of the rate hikes with potentially one more rate hike before they pause.
The Fed will be closely monitoring the evolving situation.
The markets, in response, have been fairly volatile, as expected, following the announcement, with lots of ups and downs.
Anytime headline news comes out, it can evoke emotions of concern, fear, or doubt. Or questions around if you are invested properly. If you are experiencing any of these feelings or have any specific questions feel free to reach out to our team. Thanks, and have a great rest of your week.