Inflation vs Recession – What to Do

The FED and BOE are expecting to keep interest rates the same for the second time in a row. Norway’s central bank has kept borrowing costs unchanged. For the FED, that’s the highest level in 22 years. Does this mean that things are on the up?

As predicted higher inflation is here to stay. We might as well get comfortable with higher prices and higher interest rates. Deglobalisation and less international trade have been a big contributor to increased inflation as well. Sustained High interest is still far better than a recession.

 A recession is when there is a sustained period of weak or negative economic growth which could lead to a rise in unemployment which in turn, leads to even less economic growth. Raising interest rates higher could cause the US economy to go into a recession. There is a tightrope balancing act between recession and high-interest rates.  It is more likely that the FED will opt to keep interest rates the same for a longer period, to allow the economy to recover.

The markets will be buoyed by the Fed not raising rates as it means we’re nearer to the end of the most aggressive rate-hiking programme in generations.

As interest rates are anticipated to remain elevated for an extended period, and a year-end market rally is expected, investors must adopt a prudent approach to navigate these evolving financial landscapes.

It also means that most investors will need to revise their investment portfolios to ensure it is protected against these events.

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