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\u200bThe Federal Reserve will most certainly hold US interest rates steady at the current 23-year high and investors need to review their portfolios amid a divergence in global monetary policy, a leading financial advisor said Wednesday.<\/p>\n
\u201cWith the annual CPI increase at 3.3%, markets might be hopeful for potentially more rate cuts, but there remains a real risk that the Fed\u2019s cautious approach means that such a move may not come until 2025,\u201d said Nigel Green, the CEO of deVere Group, a leading independent financial advisory and fintech.<\/p>\n
The latest Consumer Price Index (CPI) report shows no increase in inflation for May, a sign that inflation may be easing its grip on the US economy.<\/p>\n
\u201cThe Labor Department\u2019s CPI report, a key gauge of inflation that tracks the cost of a broad basket of goods and services, remained flat from the previous month.\u00a0This lighter-than-expected inflation data has led some market participants to price in the possibility of rate cuts,\u201d explained Green.<\/p>\n
\u201cHowever, one positive data point is not enough for the US central bank to change course.\u00a0We expect Chair Jay Powell will confirm our prediction in the press conference late Wednesday.\u201d<\/p>\n
Fed officials cite the robust labour market as a significant factor in their decision to maintain the current rate. The strength of the job market provides the Fed with the flexibility to keep rates elevated, contrasting sharply with recent actions by other major central banks.<\/p>\n
Last week, the Eurozone and Canada both opted to cut their rates, and Mexico has also initiated rate reductions.<\/p>\n
\u201cThis divergence in monetary policy presents a complex landscape for investors,\u201d noted the deVere CEO.<\/p>\n
\u201cAs the US central bank maintains a tighter stance, markets are experiencing varying degrees of monetary easing. For investors, this scenario necessitates a reassessment of strategies and portfolios.\u201d<\/p>\n
With the Fed\u2019s rates remaining high, sectors such as real estate and utilities, which are sensitive to interest rates, may face headwinds. On the other hand, financials might benefit from higher rates due to increased margins on lending.<\/p>\n
As other central banks cut rates, opportunities may arise in international markets. For instance, the Eurozone and Canadian markets could become more attractive as their monetary policies become more accommodative, said Green.<\/p>\n
He explained that divergent monetary policies also typically lead to currency volatility. Investors should be mindful of potential impacts on their international investments and consider strategies such as currency hedging to mitigate risks.<\/p>\n
The future path of Fed policy will be heavily influenced by upcoming economic data. Investors should keep a close eye on reports related to employment, inflation, and GDP growth to anticipate potential shifts in the Fed\u2019s stance.<\/p>\n
Green concluded that, \u201cthe Fed is almost certainly going to keep rates steady amid easing inflation which signals a cautious approach, prioritising long-term economic stability over short-term market reactions.<\/p>\n
\u201cThis contrasts with recent rate cuts by other central banks, highlighting a global divergence in monetary policy.<\/p>\n
\u201cFor investors, this new environment requires careful consideration of interest rate impacts, global opportunities, currency risks, and inflation protection.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"