In a widely-anticipated move, the Federal Reserve hiked interest rates 75 basis points this week.  Despite the move being widely expected, financial markets plunged the remainder of the week.  So what was the catalyst? 

Analysts point to the Federal Reserve’s “dot plot”—a graph of the projections of each member of the Federal Open Market Committee (FOMC) of their most likely outcome for GDP, the unemployment rate, and inflation.  (This along with  most other Fed “tools” look in the rear-view mirror to see what’s ahead…)

Comments from Fed Chair Jerome Powell and the “dot plot” showed the Fed is expected to raise rates at least 125 basis points in its two remaining meetings this year, and the dot plot showed no rate cuts were anticipated until at least 2024. 

Bill Zox, portfolio manager at Brandywine Global, in reference to the size of the rate hikes stated, “The Fed is not anywhere close to a pause or a pivot.  They are laser-focused on breaking inflation.  A key question is: what else might they break?” (Chart from the Federal Reserve)

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