Don't fight the Fed Don't fight the Fed\images\insights\video\dice-fed-small.jpg May 22 2023 May 19 2023

Don't fight the Fed

While the markets seem to expect the Fed to reverse course, rates may stay higher for longer.

Published May 19 2023
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Video Transcript
Question: What is Federated Hermes' outlook for the Fed's rate path?
Deborah Cunningham: Generally speaking, we think that a terminal rate in the 5.25 to 5.5% range is what should be expected, what we expect for the Federal Reserves, Fed funds target range. Having said that, we disagree with where the market is pricing in from a Fed funds futures perspective, and an interest rate futures perspective, the path of the Fed going forward after that terminal rate is reached. So, once that terminal rate is reached, the market is basically saying within 2023, the Fed will likely reverse its course, and lower interest rates by anywhere from 25 to 75 basis points, which we believed not to be the case. The Fed is continuing to be stalwart on fighting inflation. They have told us that they will keep rates higher for longer, and from our standpoint, we don't like to fight the Fed, despite the fact that the market seems to be doing that.
Tags Monetary Policy . Liquidity .

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Federated Investment Management Company