The Fed's Challenge of Squaring the Dots

PGIM Fixed Income

March 2019

Robert Tipp, CFA, Managing Director, Chief Investment Strategist, and Head of Global Bonds

Since December 2018, the Federal Reserve’s change in stance stabilized the markets, breaking a cycle of tightening financial conditions that threatened the wellbeing of the mature economic expansion. In this paper, PGIM Fixed Income looks at: 1) the message that the Fed heard from the markets late last year; 2) how the Fed responded; 3) the upcoming task of “squaring the dots” (i.e. the projections for the Fed funds rate) at the upcoming March meeting, and, perhaps most important; 4) why the Fed’s late-stage fine tuning has taken on such importance this cycle.

 

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