The Fed: No Pause Now, But...

Interest Rates

The Fed: No Pause Now, But...

The Fed raised its target rate on Dec 19, as expected -- ignoring pleas for a pause that would relieve current pressures on markets fearing slower growth. Our managers discuss why and how the Fed's plans could change.


While expected, December's hike in the federal funds rate (to a target range of 2.25%-2.50%) sharpened existing anxieties about slower growth and its potential impact on risk assets.  But as Legg Mason's fixed income managers point out, 2019 could be another story.  

A change in tone

Western Asset and Brandywine Global both envision a change in tone from the Fed as it becomes more apparent that the prospects for growth and inflation in 2019 warrant a more measured approach to tightening monetary policy.

We think as the Fed comes to face a more seriously moderating growth and inflation outlook, a pause will be both signaled and warranted.Ken Leech, Chief Investment Officer, Western Asset


Raising the fed funds rate far enough so it can be lowered in the next downturn seems like a perfect attitude to create the next downturn.” David Hoffman, Managing Director & Portfolio Manager, Brandywine Global


At a minimum the Fed should be approaching balance sheet reduction cautiously, because no one really has any idea what effect it will have.” Francis Scotland, Director of Global Macro Research, Brandywine Global



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