At last week’s FOMC meeting, the Federal Reserve announced that they were raising interest rates by 75 basis points. They also reinforced the message that we can expect additional rate hikes until inflation starts to come closer in line with their 2% target. In a relatively short amount of time, the Fed has significantly changed their expectations on interest rates and the economic outlook. FOMC forecasts are now predicting that the Fed funds rate will hit 4.5% by the end of next year. Not so long ago, they had forecasted that the same rate would be zero at that point in time. Given this dramatic shift, it’s not surprising that assets like equities and credit continue to see spreads widening.
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