Less Rate Hikes, Less TIPS

Ren has been a persistent buyer of Treasury inflation-protected securities (TIPS) in 2017, but said he scaled back his purchases in 2018. The yield on TIPS move in conjunction with rising interest rates—a desirable feature last year when the Federal Reserve instituted four rate hikes, but may not be as necessary in 2019 given the growth prospects of the economy.

“I thought 2017 would be a good year because that’s the year we all talked about synchronized global growth,” Mr. Ren said. “But we didn’t see [inflation], and now, all the data shows a slowdown.”

Last week during his semiannual testimony before Congress, Federal Reserve Chairman Jerome Powell said that “crosscurrents and conflicting signals” are warranting a patient approach with respect to interest rate policy.

In a prepared testimony to Congress, Powell said that domestic and global developments have “along with ongoing government policy uncertainty, warranted taking a patient approach with regard to future policy changes.” Furthermore, Powell said that economic data will continue to be the primary driver in future Fed decisions, but will be more flexible with the inclusion of new data.

“Going forward, our policy decisions will continue to be data dependent and will take into account new information as economic conditions and the outlook evolve,’’ Powell told the Senate Banking Committee. “We’re in no rush to make a judgment about changes in policy.”

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