15 June 2023
If you are covering the Federal Reserve’s decision to leave interest rates unchanged, please find below a comment from David Henry, investment manager at Quilter Cheviot:
“For the first time in well over a year, the Federal Reserve has held interest rates at their current level. While not usually a significant event, this one feels especially so. After all the hikes in the last 15 months and the various supply chain shocks, the tide is finally turning in the battle against inflation.
"But victory is not being declared yet. The Fed has made it clear all along that it is responding to the data and core inflation remains well above target. This pause is very much the Fed in wait and see mode – it will still be looking for its action to date to take effect in the economy, and thus won’t want to slam the brakes on too hard. On the flipside, however, we can’t expect a pivot to rate cuts anytime soon either, and instead rate rises are still on the table for the next meeting.
“Markets will continue to second guess what the Fed will do, and this will only add to the volatility we have seen for the past 18 months. While the end of this hiking cycle is in sight, it doesn’t necessarily mean the difficult conditions for investors will wash away with it. Diversification and focusing on quality businesses continues to be the key as earnings get challenged and consumer spending potentially sours.”
