Search this website. You can use fund codes to locate specific funds

Response to Federal Reserve meeting

Senior Economist, Silvia Dall’Angelo, responds to the latest Federal Reserve meeting:

Going into today’s meeting the Fed faced a communication challenge: it had to acknowledge recent positive news implying upside risks to the economic outlook, while also preventing an excessive market reaction leading to an unjustified tightening of financial conditions.  

In the event, the Fed managed to balance the two needs. It upgraded its short-term growth forecasts aggressively, reflecting the impact from the latest $1.9tn fiscal injection, positive vaccine rollout and upside surprises in data. However, it also restated its determination to keep monetary conditions very accommodative in the foreseeable future. In particular, the highly anticipated dot plot showed that a majority – albeit slim – of FOMC members still expected the policy rate to be unchanged at its current record-low level throughout the end of 2023. 

The guidance on asset purchases was also unchanged, suggesting that tapering is probably a story for next year. 

Going forward, the Fed will face intensifying and opposite tensions. On the one hand, the recovery will continue to need the support from easy policies  as the labour market gradually heals and inflation goes sustainably back to target. On the other hand, there is a creeping concern that the massive fiscal stimulus provided so far will lead to an overheating economy and runaway inflation. The former force will prevail for now, also supported by risk management considerations – at this stage doing too little is deemed riskier than doing too much.  

Should runaway inflation emerge down the line, the Fed believes it has plenty of tools to successfully curb it. That is, if it manages to maintain its independence in that scenario.

Latest Articles

High Copper Prices to Drive Peru’s Economy
Our GEMs team share findings from a recent trip to Peru
Federated Hermes expands Global Fixed Income team with Private Debt hire
Federated Hermes has announced the appointment of Christoph Lausecker as a Director in its Private Debt team. Reporting to the Head of Direct Lending, Laura Vaughan, Christoph will be based in London and will work across the private debt platform, with a focus on the German-speaking market.
Federated Hermes launches ‘Article 9’ Biodiversity Fund in affiliation with the Natural History Museum
Biodiversity Fund is newest addition to Impact product offering
Engagement relating to the conflict in Ukraine
An update on our engagement efforts
Five trends shaping expectations for Global Credit fundamentals in 2022
Our Credit team has become moderately cautious on the outlook for global fundamentals
China Property: are the new rules on escrow accounts a buy signal for offshore bonds?
New escrow rules could mark inflection point Chinese property has been waiting for

Press Contacts

Johnny Weir,
Head of Corporate Communications, Federated Hermes Limited
Rachael Dowers,
Associate Director - Corporate Communications
Hannah Bellfield,
Manager - Corporate Communications
Jake Rosenberg,
Assistant Manager - Corporate Communications