FILE – In this May 4, 2021, file photo is the Federal Reserve in Washington. (AP Photo/Patrick Semansky, File)
According to a Bloomberg report, investors are skeptical that the Federal Reserve can tame the worst inflation in four decades without driving the economy into a recession.
That’s bad news for Americans, who face the prospect of a downturn as their bills for food, rent and fuel swell. But to bond investors hit by deep losses this year, it may mean any further pain will be short-lived, as a recession will spark the U.S. central bank to cut rates next year. That’s according to the results of the latest MLIV Pulse survey.
Over 60% of 1,343 respondents said there’s a low or zero probability that the U.S. central bank can rein in consumer-price pressures without causing an economic contraction. The survey was conducted July 18-22 and included retail and professional investors.
“Whether the Fed can successfully tackle inflation is uncertain because it’s a very challenging task,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management. “I don’t think the Fed will ignore the rising recession risk, but at the same time, they are focused on inflation. So I’m still bearish on Treasuries — but we are probably in the eighth inning on the upper limit for yields.”
