This month’s meeting was notable because it included the first post-meeting press conference by new Fed Chairman Jerome Powell. Markets were watching closely to discern his policy views and direction.

Powell’s statements suggested that the economy is expanding at a moderate pace, but that inflation, or lack thereof, allows room for the Fed to be gradual in its policy normalization. Further, his commentary suggested that he sees no imminent inflationary threat, stating in the press conference that there is little evidence to suggest that the US is experiencing a persistent acceleration in inflation.

Invesco Fixed Income’s outlook

The outcome of this meeting is largely in line with our views. Although we expect inflation to be firm over the next two months, we expect it to slow to a pace that supports two additional rate hikes this year.

Continued US growth, along with expectations for a benign inflationary environment, should support a gradual tightening path for the Fed, in our view. Going forward, we believe a benign inflationary environment and gradual monetary policy normalization should be bearish for the US dollar and supportive for risk assets like investment grade and high yield bonds.

This article was republished with permission from Invesco Powershares.