August 2020 - The Fed would allow inflation to achieve moderately above 2% - Tactical Fund Manager's Comments

11 September 2020

Clement Perrette, Gilles Pradère

The Fed keeps its dual mandate of price stability and maximum sustainable employment. However, the monetary institution is now privileging employment while hoping to raise consistently inflation levels to 2%. Indeed, the Fed failed to achieve this objective as core PCE has only reached 2% at its peak and is just averaging 1.5% since 2008. The immediate consequence of this policy shift is a strong commitment to keep interest very low for very long. The Fed’s individual members rate hike projections are in line with such a statement as projections show no action before 2023.

Source: Bloomberg

A zero interest rate policy over the coming years calls for remaining invested by adopting a flexible, diversified and quality-biased approach.

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