What will prompt central banks to stop hiking interest rates altogether? Look to wages for the answer, says Pendal’s head of income strategies AMY XIE PATRICK
“The US Fed is looking for inflation not only peaking but coming down very convincingly to its 2% target,” says our head of income strategies, Amy Xi Patrick in her latest fast podcast.
“Wage growth in Australia is only at around about 2.5% to 3%.
“The RBA is comfortable for it to go up to 3.5%, maybe even temporarily to 4%.”
“Wage growth in the US however, is hovering at about 5.5% to 6% percent, which is clearly not consistent with the 2% inflation rate. “
This means inflation will be stickier than the market expects.
Central banks may slow down hikes, but they will be hiking for longer next year than the market currently expects, says Amy.
Higher-quality fixed income assets will help offer some buffer for future volatility, says Amy.
Listen to Amy’s fast podcast to find out how.
Find out more about Pendal's fixed income strategies at pend.al/fixedinterest
Pendal is an independent, global asset manager. Find out more at pendalgroup.com