Commenting on the latest rate hike by the Fed, Melanie Baker, senior economist, at Royal London Asset Management, said:
“The Federal Open Market Committee (FOMC), as expected, raised rates 25bps, with their projections implying one fewer rate rise next year. However, the signals sent in the statement and forecasts weren’t as dovish as we had expected, e.g. only making a small adjustment to their language around “further gradual” hikes (by adding the word “some”). A more cautious signal from the Fed could have been justified (and would have been welcomed by equity markets) given the tightening in financial conditions and weaker global growth backdrop. However, the domestic economic data has looked strong enough to suggest that we aren’t at the peak of the rate cycle quite yet.
“We have pencilled in two more rate rises next year from the Fed which would be in line with what the FOMC’s economic projections now signal; the US economy continues to outperform, labour markets look tight and pay growth has been rising. However, tighter financial market conditions and signs of some loss of momentum in the US economy, suggest a reasonable chance that the Fed will take an extended pause sooner than expected.”
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About Royal London Asset Management (RLAM):
Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions to both wholesale and institutional clients such as not-for-profit organisations, local authorities and the insurance sector.
RLAM manages £114 billion of assets and employs 92 investment professionals as at December 2018. It invests in all major asset classes including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, property and cash.
For professional clients only, not suitable for retail investors.
Issued February 2019 by Royal London Asset Management Limited, registered in England and Wales number 2244297; authorised and regulated by the Financial Conduct Authority. Registered Office: 55 Gracechurch Street, London, EC3V 0RL.
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