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News & Views

Provided by the Investment Professionals of Frost Investment Advisors | June 20 , 2022

The Fed’s Change in Policy, Earnings Revisions, Housing Affordability

Can the Fed Engineer a Solution for Inflation?

The Federal Reserve’s 75 basis point increase in interest rates last week was the largest rise in rates since 1994. This hike appears to reflect an abrupt change from prior Fed guidance, perhaps spooked by the worst inflation data since the waning years of the Carter administration. Worries that high costs may persist have motivated the Fed to cut its 2022 growth forecast as well as its outlook for 2023. While this change in policy may be well-intended, we’re concerned that the Fed is tightening aggressively into a weakening economy, amplifying the chances of a recession.

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