Recent Rumblings From the Fed Could Make This Vanguard Bond ETF a Better Buy
Possible Fed rate increases in 2026 could make short-term bonds a good choice.
Overview
The Federal Reserve might not be done raising interest rates to fight inflation. According to a June 30 interview with CNBC, Cleveland Federal Reserve President Beth Hammack said that the artificial intelligence (AI) boom could be causing inflation, with high demand for AI infrastructure and energy driving higher costs in the economy.
Hammack said: "We've got inflation that's too high, and it's been too high for the past five years. ... [W]hen I look at policy if that continues, it may mean that we need higher interest rates to bring inflation back down to target."
Details
Hammack isn't the only member of the Federal Open Market Committee who gets to vote to set short-term interest rates. But if Hammack's analysis is on target and inflation is not "over" yet, that could motivate the Fed to raise interest rates later in 2026. That means anyone who's thinking about buying bonds might want to prepare for interest rate risk.
Source
Originally published at www.fool.com.