The Federal Reserve’s response to inflation is once again being closely watched as investors grapple with a deteriorating economic outlook and the stock market is now in bear market territory. . Concern is growing that the US economy is now paying the price for a Fed that has fallen too far behind the curve. After initially describing pandemic-era inflation as “transient,” Fed Chairman Jerome Powell finally conceded last November that “it’s probably a good time to pull back from there.” The central bank has raised its federal funds rate to a range of 3% to 3.25% since March. Earlier this month, they signaled their intention to raise interest rates as high as 4.6% in 2023 to keep inflation in check. The Fed’s dot chart also shows that central bank officials expect a rate hike to 4.4% by the end of 2022. ‘It’s too early’, though, though the Fed has raised its direction. alone, calls are growing for the central bank to slow the rate at which interest rates rise amid growing warnings that economic growth could stall. “I think the Fed has to be really careful here. If they continue without stopping, that will really create a real possibility of a significant recession,” said Ed Yardeni, president of Yardeni Research. told CNBC “Squawk Box Asia” on Wednesday. . “The Fed has to realize that they’re not just limited in terms of rate hikes … and on top of that, they’ve started quantitative tightening, which means a reduction in securities on their balance sheet. All these things. that has resulted in a very strong dollar,” he added. While the Fed’s latest guidance hinted at another 75 basis point rally at its November meeting, Yardeni said he believes it’s “too early.” He believes that inflation is “starting to go down”, which will convince the Fed that it should “cool down”. [the rate hikes] Yardeni said the combination of monetary tightening and fiscal stimulus has led to a return of “bond watchers”. “bond alert” in the 1980s – refers to investors in the bond market selling large amounts of bonds to protest rising inflation and demanding higher yields on their bond holdings. His remarks came as the worst bond sell-off in decades showed signs of abating U.S. Treasury yields fell, as traders reviewed comments from several speakers The Fed earlier this week suggested more rate hikes ahead, before dropping 25 basis points to 3,705% – the biggest drop since 2020 – after the Bank of England announced plans to buy bonds to stabilize the UK market, it traded at a yield of 3.8461% in Thursday afternoon trading in Asia.
