The Federal Reserve voted unanimously to raise their benchmark fed-funds rate to a range between 2-2.25%. But what does this really mean, is the Fed slowing growth and the prospect of future inflation? In our estimation, the answer is almost certainly “NO.” There are too many structural forces at work for inflation to slow near term, below are the highlights:
The above factors all point to prospects of higher inflation, which is a difficult animal to tame when it begins to accelerate. The markets expect stability around overall prices within an economy and when that does not occur, volatility in markets can ensue. Risks are increasing that the Fed is behind the curve and may have to accelerate rate hikes faster than the market is anticipating.
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