Fidelity $2.3TN's head of fixed income business said the goal of Fed policymakers is to curb inflation while maximizing employment, which is "pulling them in a very different direction."
Robin Foley told the Financial Times that the U.S. central bank "inflation rates are all good, but still to be seen." She added that the central bank is in a difficult place”.
Foley's comments are because the Fed stopped a cycle of cuts this year, which began in 2024 as Trump's taxes on large trading partners threaten to increase inflation and break into the job market.
Recent economic reports show that the Fed has made progress in pushing inflation toward its 2% target while unemployment remains exhausted. But the survey shows that Americans are increasingly worried about their job prospects, and many companies warn that tariffs could lead to higher prices.
"We may find ourselves in a challenging situation with a double goal in a tense state of challenging situation," Fed Chief Jay Powell said last month.
Foley, who has worked for 39 years at Fidelity, based in Boston, and maintains a low profile than many industry peers, notes that market participants’ expectations for interest rates have experienced “very volatile” over the past year. Trading in the futures market shows that investors expect the Fed to resume cutting borrowing costs in September, much later than forecasts at the beginning of the year.
Foley added that strong volatility in the U.S. government bond market appears to be one of the reasons the president finally alleviated his position on taxes after Trump’s so-called “Liberation Day” announcement announced April 2.
Despite the turmoil in the market, Furley said Fuller’s “overweight risk” to the main benchmark is “but not overly high” in some of its fixed income strategies.
As of March 31, almost one-third of the asset manager’s flagship total bond fund sat in corporate bonds, with a distribution of just 25% relative to the fixed income index tracked by Bloomberg. The same flagship fund is less than one-third of its holdings in U.S. government debt, down from 46% of the benchmark.
"The output on the market is very attractive now, even in the form of U.S. Treasury; this has not been the case for a long time," Foley said.
“With this as a background, you really need to be compensated to take gradual credit risk,” she added.