Mutual fund giant Vanguard, which managed $8.1 trillion in assets as of August, predicts that the Fed may need to continue raising interest rates more than many expect.
Company analysts also predict that borrowing costs will remain high until late 2024.
Joseph Davis, Vanguard’s Chief Global Economist and Head of Investment Strategy Group, cited the neutral interest rate, which has risen significantly since the 2007-2009 recession, as the main reason for this prediction.
Vanguard analysts have predicted that the Fed will raise interest rates up to three times following today’s steady hold.
The neutral interest rate is the level of monetary policy that neither stimulates nor restricts economic growth. According to Davis, the higher this rate, the tighter the Fed policy must be to significantly affect the economy and inflation.
Davis’ view, released today, is more hawkish than futures traders’ view of the Fed funds rate decision. These traders currently see the odds of the Fed making no further changes for the rest of the year as over 50%.
*This is not investment advice.
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