Fed Decision Sows Seeds of Potential Rate Hike in September

The US Federal Reserve's decision to keep interest rates steady has sparked debate about potential future rate hikes. According to Michael Greenberg, senior vice president and portfolio manager at Franklin Templeton Investment Solutions, the seeds of a hike in September are already sown.

Greenberg points out that three dissenting governors argued for a hike, and Fed Chair Kevin Warsh's comments about a 'good family fight' suggest that there may be an interest rate increase at the next Federal Open Markets Committee (FOMC) meeting in September.

Inflation above the Fed's 2% target has significant implications for US fixed income assets. Greenberg warns that persistent inflation means higher overall interest rates and higher rate volatility, making diversification crucial for investors. He notes that true diversification may lie beyond public fixed income markets.