![]() “It would likely come with some significant shakeout amongst businesses and the labor market,” they said in a note. In weekly commentary, Baird’s Ross Mayfield and Nicholas Bohnsack, president and head of portfolio strategy at Strategas, a Baird company, predicted that even if inflation continues a downtrend, the cost of getting levels from 4% to the Federal Reserve’s long-term price stability target of 2% becomes “increasingly higher.” ![]() With a slower pace and eventual pause on rates seemingly underway, Wall Street’s attention has turned to the longer term impacts of a higher rate environment on growth. “A slower pace of hikes seems appropriate from a risk management perspective, but strength in labor markets, in our view, likely means the Fed will have to lean in the direction of doing more, not less, to put inflation on a sustainable downward trajectory.” “Risks to our outlook for Fed policy are skewed toward higher terminal rates given the persistent imbalance between labor supply and labor demand,” Bofa strategists led by Gapen stated in a note released Friday after November’s hot jobs report. (Photo by Drew Angerer/Getty Images)Īnd while expectations for a downshift from the 0.75% hikes delivered over the past four meetings are largely priced in, investors now wonder how much longer the central bank’s tightening campaign will last, how high the federal funds rate will go, and how long it will stay there before any cuts.īank of America projects the terminal rate to reach a range of 5.00%-5.25%, a view many of its megabank peers share, though BofA Chief Economist Michael Gapen speculated in a call with reporters last week that the rate may go as high as 6% due to the tremendous momentum of the labor market. WASHINGTON, DC - NOVEMBER 30: Fed Chair Jerome Powell looks over notes while speaking at the Brookings Institution in Washington, DC.
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