Kevin Mahn, chief investment officer of Hennion & Walsh, in Parsippany, N.J., says the Federal Reserve is taking a more low key, subdued approach to interest rates, a demeanor he things will continue.

“While I believe that the Federal Reserve would like to have adopted more of an increasingly hawkish stance, given solidifying economic data in the U.S. and certain mounting inflationary pressures this year, they have instead largely taken more of a dovish tone presumably to appease certain vocal dissenters and those concerned with global economic growth altogether,” Mahn says.

He describes the “hovish” stance (a term Mahn uses to describe the ongoing hybrid state of hawkish/dovish positioning by the Fed) now appears to be leaning more toward a hawkish stance as Fed Chair Janet Yellen recently stated that she feels the case for an increase in the federal-funds rate has strengthened in recent months while the Kansas City Fed President Esther George also recently suggested that it is time to move rates.

Mahn is calling for a significant hike in rates by year-end.

“While the market originally believed that we may only see one 25 basis-point (i.e. 0.25%) hike to the federal funds target rate in December, I would not be surprised to see a 25 Basis Point hike in September after their next meeting concludes on September 21 as well,” he says. Mahn says his viewpoint was seemingly priced into the markets this past Friday as the selloff that took place was largely attributed to traders and investors repositioning their portfolios as a result of the most recent hawkish comments from the Boston Fed President Eric Rosengren earlier that morning. “In reality, one, or even two, 25 basis point hikes will have relatively little impact on the demand or supply for credit and should have relatively little impact on capital markets worldwide,” he adds. “The hikes will, however, restart the Fed’s tightening engine and give them some room to cut rates, as needed, if economic conditions deteriorate significantly down the road.”

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