Financial markets faltered again last week as the prospect of a third consecutive 75-basis-point rate hike by the Federal Reserve (Fed) looms larger. Treasury rates across the yield curve are quickly moving toward 4% — the highest levels since the global financial crisis of 2007-09.
Fed policymakers appear increasingly stuck between a rock and a hard place, with inflation remaining stubbornly high while the global economy shows more signs of stress. Last week’s profit warning by Federal Express — less than a quarter after raising its dividend — was a troubling sign for both economic growth and corporate earnings. Market volatility is likely to remain elevated as Fed Chair Jerome Powell’s warning of “some pain” being necessary to fight inflation plays out.
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