Not won yet

The Fed increased interest rates by 50 bps yesterday, slowing down from its previous string of 75 bps raises. At the press conference after the announcement of the decision, Powell stated “we still have some way to do” and we will “stay the course until the job is done”. We believe investors should not underestimate the Fed’s willingness to bring and keep down inflation by keeping a hawkish stance as indeed the US economy remains strong and inflation could come back with a vengeance if the Fed pivots too soon. This is shown impressively in the graph below comparing the path of inflation in the 70s to the current CPI. The battle on inflation is not won in 2022.