Our featured article of the month, Fed Chair Changes His Tune, describes the recent shift in language being used by Chairman Powell to address inflation in the economy. As inflation continued to gain traction throughout 2021, Chairman Powell had no choice but to acknowledge what many consumers have already realized, inflation is here to stay.
While we understand the FOMC must wait to collect all of their data points prior to adjusting their position, consumers are very sensitive to even small shifts in prices affecting their daily living. Naturally, consumers will then take action to adjust their spending accordingly. However, it is important for the FOMC to formally recognize this change and address it through some policy response prior to it getting too out of hand.
Additionally, your investment allocation may need to be adjusted as markets contend with inflation figures not witnessed in over a decade.
Powell’s testimony to Congress may be telling.
If you weren’t paying close attention, you might have missed it.
Fed Chair Jerome Powell dropped the word “transitory” when describing inflation during his recent testimony to Congress.1
Powell had told the story of transitory inflation for the past several months while the Consumer Price Index showed eye-popping, year-over-year gains of 5% to 6%.2
But now it appears that the Fed Chair has changed his tune.
Powell said that rising energy prices, higher rents, and strong wage gains could keep inflation elevated, though he maintained that inflation would decline sometime in 2022.3
So does that mean it’s time for investors to prepare their portfolios?
Inflation and interest rates are only two factors in an overall investment strategy. And at this point, the Fed has only provided a rough timeline about when to consider raising short-term rates.4
As hard as it can be, sometimes wait-and-see is the best approach. Recent market volatility has been making headlines, which can be unnerving. If you find yourself second-guessing your overall approach, speaking to your financial professional may be a smart move.
The forecasts or forward-looking statements about the 2022 interest rates are based on assumptions, subject to revision without notice, and may not materialize.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1. Reuters.com, November 20, 2021
2. BLS.gov, November 10, 2021
3. WSJ.com, November 30, 2021
4. CNBC.com, November 10, 2021