Monday, January 24, 2022

Hawkish Fed signals it may have to hike rates sooner to curb inflation

Must Read

Moynihan Food Hall brings artisanal — and democracy — to Penn Station area

Hungry and thirsty Moynihan Train Hall users no longer have to trudge outside to neighborhood joints to eat...

A shooting took place at a home party in Los Angeles, killing 4 people and injuring 1

Four people were killed and another was injured in a shooting at a home in the Los Angeles...

Beto O’Rourke was “not interested” in Biden’s help during the Texas gubernatorial campaign

NEWNow you can listen to Acesparks articles! Texas gubernatorial candidate Beto O'Rourke told reporters Friday that he...


In a statement released on Wednesday, Dec. 14, Federal Reserve officials said the U.S. labor market was “very tight” and that the US Federal Reserve may need to raise interest rates faster and start reducing total assets to offset higher inflation. -15 political meetings.

“Participants typically noted that given the individual’s outlook for the economy, labor market, and inflation, an increase in the federal funding rate could be guaranteed faster or faster than participants expected. Some participants also noted that the federal funding rate “It may be advisable to start reducing the size of the Federal Reserve balance relatively soon after the start of the increase,” the protocol said.

The language showed the depth of the consensus that has emerged in recent weeks on the need for the Fed to tackle high inflation – not only by raising borrowing costs, but also by acting second-hand and reducing the central bank’s treasury bonds and mortgages. through. -secured securities accumulated to maintain long-term interest rates during a coronavirus pandemic.

The Fed has about $ 8.8 trillion in its balance sheet.

Markets quickly took notice.

As observed by the CME Group’s FedWatch tool, the probability that the Fed will raise interest rates in March for the first time since the pandemic began has exceeded 70%.

Inflation, as seen in the prices consumers pay for food and gas, is more than double the Central Bank’s 2 percent rate.

It also led to the prospect of a reduction in the Fed’s participation in long-term bond markets, leading to the largest weekly growth in U.S. 10-year Treasury yields in a year.

U.S. stocks fell to their lowest level since the results of last month’s meeting were announced, perhaps showing more confidence than Fed policymakers expected investors to fight inflation. The yield on the 2-year Treasury note, the most sensitive to Fed policy expectations, rose to its highest level since early March 2020, and since then the economic crisis caused by the pandemic has only just escalated.

“It’s news,” he said. It’s worse than expected, “said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

The gas station shows the price of a gallon of gas at around $ 6
The minutes of last month’s meeting of the Federal Reserve probably show that the central bank has more confidence in the fight against rising prices.

What do the Fed minutes tell us about policy changes?

The statements elaborated on the sharp changes in the Fed’s policy in the fight against inflation last month, which rose more than twice the central bank’s rate of 2 percent.

In addition to inflation concerns, officials said the economy is at a maximum, given retirement and other job losses, even if the U.S. labor market is short of more than 3 million jobs before the pre-pandemic peak. said it was closing quickly to what could be considered employment. the labor market caused by the health crisis.

“Participants pointed to a number of signs that the U.S. labor market is very tight, including layoffs and vacancies close to record levels, as well as significant increases in wage growth,” the statement said. in the protocol. “Many participants concluded that if the current pace of improvement continues, labor markets will quickly approach maximum employment.”

There is a Help Wanted sign in front of the restaurant where the masked man is passing
The Fed has pointed to the U.S. “hard” labor market, perhaps emphasizing the need for faster cuts.

Although the views were in mid-December, before the current sharp rise in COVID-19 infections, officials said the spread of the Omicron variant at that time would at least “radically pave the way for economic recovery. They have made it clear that they have not changed. In the United States. “

In December, policymakers agreed to speed up the end of the pandemic bond-buying program and announced forecasts that they expect the rate to triple by a quarter of a percentage point by 2022. The Fed’s overnight interest rate is now close to zero.

The meeting in December came as the incidence of coronavirus infections began to rise due to the spread of the Omicron variant.

We hire a sign outside the Target store
The Fed also noted that people are close to a record level of leaving their jobs and vacancies.

Since then, infections have spread and there is no explanation as to whether a change in the health of senior Fed officials has changed their views on appropriate monetary policy.

Fed Chairman Jerome Powell will go to the Senate Banking Committee next week to hear his candidacy for a second four-year term as central bank governor, and then he may update his views on the economy.

.

- Advertisement -
Latest News

Moynihan Food Hall brings artisanal — and democracy — to Penn Station area

Hungry and thirsty Moynihan Train Hall users no longer have to trudge outside to neighborhood joints to eat...

A shooting took place at a home party in Los Angeles, killing 4 people and injuring 1

Four people were killed and another was injured in a shooting at a home in the Los Angeles area early Sunday morning, according...

Beto O’Rourke was “not interested” in Biden’s help during the Texas gubernatorial campaign

NEWNow you can listen to Acesparks articles! Texas gubernatorial candidate Beto O'Rourke told reporters Friday that he was "not interested" in President...

Kevin Parker commented on the cover of Tame Impala at the top of The Wiggles chart

Kevin Parker commented on the news The Wiggles The Australian trio j topped the Hottest 100 chart with a Tame Impala cover. It was...

Knicks beat Clippers as RJ Barrett, Julius Randle thrive

The Knicks took back a small portion of the old Julius Randle and many new and improved RJ Barretts one afternoon. Bad Randle...
- Advertisement -

More Articles Like This