Fed Rate Hikes Slow Housing but Broader Recession Avoided, Investors Urged Caution as Inflation Stays High

• Economists predicted recession 2 years ago due to high inflation and low unemployment, but soft landing achieved instead with inflation falling and economy still growing • Fed launched intense rate hike campaign in 2022-2023, slowing housing market but not broader economy • Vanguard has revised economic forecasts upwards - now sees 2% GDP growth in 2023 and 4% unemployment • Vanguard expects inflation to stay elevated at 2.6% this year, above Fed 2% target • As a result, Vanguard forecasts Fed will not cut interest rates in 2023 and investors should have diversified portfolios