“Transitory” Brings Some Balance to Fed Outlook

PGIM Fixed Income

May 2019

Ellen Gaske, PhD, CFA, Lead Economist for G10 Economies, Global Macroeconomic Research Team and Robert Tipp, CFA, Chief Investment Strategist and Head of Global Bonds

The Fed’s statement released after its May policy meeting noted that inflation has declined and is running below the Fed’s 2% target. Powell's subsequent comments that the decline has been due to transitory factors threw cold water on the prospect of an impending rate cut. PGIM Fixed Income’s base case is that the Fed will likely remain on hold for the foreseeable future. They see the relatively stable growth backdrop, combined with the generally low levels of government bond yields, as contributing to an overall “search for yield” investment environment.

 

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