Research Brief: Financial Markets – May 2022

Fed continues along established stratagem to combat inflation. On May 4 the Federal Reserve raised the Federal Funds rate by 50 basis points in the second of seven planned rate hikes for the year. Now at a target range between 0.75 percent and 1.00 percent, the effective overnight lending rate is expected to climb to the 2 percent to 3 percent zone before the start of 2023 if the Fed continues with this strategy. Numerous forces continue to put upward pressure on inflation. Global supply chains remain disrupted, with significant production shutdowns in China. Labor shortages persist, with only about half as many people looking for work as jobs open, placing upward pressure on wages. The Fed’s actions are a step forward relieving these pressures by raising borrowing costs.

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