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Inflation: 'I don’t think the Fed can solve it alone,' strategist says

·2 min read

At next week’s Federal Open Market Committee (FOMC) meeting, investors are anticipating the Fed to hike interest rates by an additional 50 basis points. In May, the Fed upped rates by a half-percentage point — the biggest hike since 2000 — in an effort to cool soaring inflation.

But the Fed hiking rates or tapering its balance sheet is “likely to have [a] minimal impact” on macroeconomic headwinds, PNC Asset Management Chief Investment Officer Amanda Agati told Yahoo Finance Live.

"At this point, we have to be really realistic about what the Fed's policy tools in the toolkit can actually do, given the perfect storm of macro headwinds that this global economy is facing. The Fed is very much used to tightening policy in response to an overheating economy. But I think what's interesting this time around is, we're already in a slowing expansion phase of the cycle," she said.

The Russian invasion of Ukraine pressuring global commodities, coupled with China’s lockdowns and zero-Covid policy are part of the story for rising consumer prices, Agati said. "Until we start to see some of these other forces take some of the inflationary fire out of the backdrop, I don't think the Fed can solve it alone," she added.

It’s no secret that consumers are taking more out of their wallets. The consumer price index (CPI) jumped 8.3% in April 2022, with May’s report out this this Friday.

“Consumer balance sheets are looking very strong,” Agati explained. “For the most part, they have returned to pre-pandemic levels.” Nonetheless, with 4 to 5 more rate hikes expected this year, the markets and investors are on the lookout for what comes next from the Fed.

Yaseen Shah is a writer at Yahoo Finance. Follow him on Twitter @yaseennshah22

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