The latest consumer price index report, which suggested that inflation was cooling, made investors confident that the Federal Reserve would pivot from its hawkish path on raising interest rates. Recent comments from Fed officials indicated that the U.S. central bank isn’t planning to ease up on the gas just yet.
After markets rallied the week the CPI report came out, Federal Reserve Governor Christopher Waller said on Sunday that markets appear to have overreacted to the data. “The market seems to have gotten way out in front over this one CPI report. Everybody should just take a deep breath, calm down,” Waller said. “We’re going to see a continued run of this kind of behavior and inflation slowly starting to come down before we really start thinking about taking our foot off the brakes here.”
Added Waller: “We’ve got a long, long way to go to get inflation down. Rates are going to keep going up and they are going to stay high for a while until we see this inflation get down closer to our target.
On Monday, Fed Vice Chair Lael Brainard said that the central bank could soon slow the pace of its rate hikes, telling Bloomberg: “I think it will probably be appropriate soon to move to a slower pace of rate increases.” While this suggests a slowdown on rate increases may be on the horizon, that doesn’t mean the Fed will stop raising rates.
“I think what’s really important to emphasize is we’ve done a lot but we have additional work to do both on raising rates and sustaining restraint to bring inflation down to 2% over time,” Brainard added.
The Fed raised the target range for the federal funds rate by 75 bps this month, marking the sixth consecutive rate hike and the fourth increase of 0.75%. The Fed plans to meet one more time this year to discuss what to do with interest rates on December 14.
With there still being “a long, long way to go to get inflation down,” investors may want a steady hand at the wheel. That’s where active management can come in handy.
While passive strategies lack the flexibility to adapt to changing market environments, active ETFs can offer the potential to outperform benchmarks and indexes. Plus, active managers with greater resources and greater scope benefit from economies of scale, which can often translate to better returns.
“Active managers have the flexibility to take advantage of market volatility and add to favored positions when prices become more attractive,” said Todd Rosenbluth, head of research at VettaFi.
T. Rowe Price offers a suite of actively managed ETFs. T. Rowe Price has been in the investing business for over 80 years through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying an average of 22 years of experience.
For more news, information, and strategy, visit the Active ETF Channel.