Strong Economic Data Fuels Investor Fears of Prolonged High Interest Rates
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While faster growth usually boosts stocks, investors now see it as a sign the Fed will maintain high interest rates longer due to inflation. This has roiled markets for weeks.
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A better-than-expected September jobs report could stoke more fears the Fed will keep rates high through 2022. Markets are on edge ahead of the report.
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Biden wants a strong economy through the election year, but that clashes with the Fed's inflation fight. Wall Street braces for high rates that make borrowing expensive.
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The Fed seems comfortable with a "higher-for-longer" path for rates if the economy stays strong. This suggests rate cuts may not come soon.
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The recent run-up in long-term Treasury yields could ease pressure on the Fed to hike more. But without clear slowing, pressure will remain.