With the economy slowing down, some investors believe the Federal Reserve will be less aggressive about raising rates — a potential positive for stocks.
With clear signs the economy is slowing, some investors believe the Federal Reserve will have to be less aggressive about raising interest rates — a potential positive for stocks. But with the unemployment rate at a low 3.6% and consumer inflation running at a hot 9.1%, other strategists do not believe the Fed will easily back down from its vow to fight inflation. In the second quarter, the economy contracted by 0.9% as spending and investment slowed.
Some market pros said the stock market took the Fed comments as dovish Wednesday, since the central bank acknowledged that the economy was slowing — meaning it may ease back on its tighter monetary policy campaign. Mohamed El-Erian, Allianz's chief economic advisor, said the Fed needs to focus on putting the "inflation genie" back in the bottle. "I think the worst outcome is next year we are in a recession and inflation has proven very sticky.
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