Capital Gearing Trust PLC Q3 2023 Investor Webinar Transcript
(technical difficulty) Well, this feels like one of those COVID presentations. Next slide, please.
Next slide. So at the same time, as we have the supply constrained economy, what we've also seen is yields rise considerably, and financial conditions are now very tight. So as we all know, the Federal Reserve has responded to this surge of inflation by increasing interest rates by 525 basis points over the course of the tightening cycle and the latest Fed dot plot suggests that most of the FOMC expect one more rate rise before this year ends, and rates higher for longer after that period.
In the FOMC's own language, they consider this policy stance to be restrictive. But financial conditions are also restrictive relative to what's called a neutral policy stance. So the green line on the chart shows R star which is the theoretical policy rate at which the economy is fully employed and inflation is kept a target at 2% levels.
And what you can see in the pink line
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