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Higher for longer

O’Leary’s “higher for longer” prediction, which is shared by many economists in the U.S., is based on the fact that the Fed has struggled to hit its inflation goals.

Consumer prices rose higher than expected in March, at a 3.5% annual increase, according to the latest Consumer Price Index data from the Bureau of Labor Statistics. That’s a considerable jump from February’s 3.2% rate and marks the highest annual gain in the past six months.

That was not the news the Fed — which is under immense public pressure to loosen monetary policy — wanted to deliver.

There are many factors keeping inflation “elevated,” from ongoing supply chain issues to international conflict and pent-up customer demand and economic stimulus from the COVID-19 pandemic. These are not easy issues to get under control.

“Inflation’s not going down anywhere near 2% for a bunch of reasons — and therefore they’re not going to cut rates,” said O’Leary. “Anybody that thinks they’re going to cut this year will be mistaken.”

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Make the most of it

While the average American has no immediate power over the price of groceries or the cost of rent, there are strategies you can follow to capitalize on the prevailing economic conditions.

O’Leary, for instance, said he is “investing under the premise that we’re going to be living with this rate cycle staying the same for the rest of the year.”

While the 69-year-old did not share any specific details of his investing strategy, there are some common moves that investors consider when interest rates and inflation are high.

Some turn to bonds and other fixed-income securities, which can offer attractive yields in an inflationary environment, while others investors focus on stocks with high dividend yields and long-term growth potential. This may also be a good time to consider investing in real estate and alternative investments, like gold, which acts as a hedge against inflation.

What you shouldn’t do, according to O’Leary, is place all your hope in the Fed.

“They keep pushing out their optimism month after month, but there’ll be no rate cuts this year,” he said on Fox Business. “I’m sorry, it’s just reality.”

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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