Stocks are off to a rough start in 2022. Investors are primarily concerned about inflationary pressures and how they might affect the economy. The most recent Consumer Price Index (CPI) for April put inflation at 8.3%. While this is below March’s CPI of 8.5%, it’s still well above the Federal Reserve’s long-term inflation target of 2%.
As a result, the Federal Reserve has responded by increasing interest rates to cool down spending. So far, it has raised the federal funds rate to hover between 0.75% to 1% after holding these rates near zero for almost two years. Investors expect the federal funds rate to be around 2.75% to 3% by the end of the year.
