https://www.cnbc.com/2021/11/02/federal-reserve-investors-seek-clues-on-interest-rate-hikes.html
The article discusses how the Federal Reserve is expecting to announce the unwinding of its monthly bond-buying program. This program was implemented to support the economy during the pandemic. Other sources expect that the Fed will fight the trend of higher prices by beginning to raise interest rates next year. The article further goes on to discuss that traders are pricing in more than two interest rate hikes for next year, however the majority of Fed officials do not even see one in 2022 in their most recent forecast. This is due to inflation, which is now at a 30 year high which has seemed to linger longer than the "transitory" description the Fed had included in its recent policy statements.
Inflation rose 0.3% for September, driving the year-over-year gain to 4.4%. Companies continue to struggle to find workers but are also raising wages to keep and attract employees. Economic experts believe that the Fed is being "stubborn" in accepting that inflation is being stickier than what they expected. Rick Rieder, the chief investment officer of global fixed income at BlackRock, said the Fed needs to show it would be willing to raise interest rates if it had to.
In regards to interest rates, it is expected that Powell will not talk about raising interest rates, but he likely won't discourage the market's pricing in of rate hikes either. Interest rates and inflation tend to be the biggest topic of discussion at the moment, especially with the holidays right around the corner.
3 comments:
I find the correlation between interest rates and the holiday season to be interesting. The holiday season can definitely cause a sharp boost in the economy and one we could frankly use. Hopefully the need for money during the holiday season will drive up employment.
Many experts believe that the lingering high inflation rate has made a significant impact on U.S. politics so far. It is not only affecting President Biden's approval rating, but it has also given the Republican Party a breakthrough to attack Democratic candidates during the midterm elections. Virginia governor win boosted the Republican Party ahead of midterm elections. The reason the inflation rate has such heavy weights in voters' minds is that, unlike other macroeconomic indicators, inflation is visible and effective in every voters' daily life.
I think Powell is right not to comment too much on rates, if it seems like the Fed is about to raise the rate it may drive the expectations of a rate increase higher thereby reducing borrowing and slowing down the recovery.
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