Stocks, Fed Meeting and Inflation: Live Updates

ImageWall Street investors will be closely watching comments from Federal Reserve Chairman Jerome Powell, after the Fed's policy meeting concludes on Wednesday.
Credit…Tom Brenner for The New York Times

Federal Reserve officials will issue a new policy statement on Wednesday in which they are expected to signal that a rate hike is imminent as policymakers react to the an economy that is strengthening and maneuvering to control price increases amid explosive inflation.

Economists do not expect the Fed to raise interest rates, which are set at near zero, at this meeting, and officials won’t release new economic projections until March. But the announcement in January comes as the Fed pivots away from a policy that hurts the economy and toward one that helps control consumer and business demand – which promises to turn it around. became a closely watched event on Wall Street.

Investors expect Fed officials began raising its policy rate in March and has increased it a total of four times this year, moves that will make it more expensive to get a loan to buy a new corporate home, car or appliance. Policymakers are in the process of slowing down the bond-buying program they’ve used to bolster the economy by keeping long-term interest rates low, and they signaled that they can start shrinking their holdings as soon as interest rates start to rise.

Officials have clearly planned a trio of policy moves, but investors are eagerly watching to see how aggressively the Fed executes them. Will policymakers simply let the short-term debt on their balance sheets run through its cycle without reinvesting it – allowing the stock to “dry up” – or will they actively sell bonds to remove support from the economy even faster? Will they raise rates three times this year, as their December economic forecast suggested, or will they raise them further?

The central bank’s policy announcement may not answer all of those questions, but it will be followed by a press conference with Jerome H. Powell, the Fed chair, and market players will analyze Analyze his words for any hints about the pace of the Fed. .

Economists have begun to wonder if the policy-setting Federal Open Market Committee can pursue a rapid path toward higher interest rates as prices rise at low levels. fastest speed in 40 years, strong wages growth and the coronavirus hanging around, give hope that the economy will return to a more normal trajectory, in which workers will return to the labor market to ease the situation. shortage.

“We see a risk the FOMC will want to do some tightening at every meeting until that picture changes,” economists at Goldman Sachs wrote in their note previewing their meeting. central bank this week.

Fed officials expect prices to rise – this happens at 5.7 percent in November, based on their preferred measure – for censorship 2 percent on their side target this year. They did admit, though, that there was a risk they would remain uncomfortably high for a long time. Unemployment has fallen rapidly, and may soon return to pre-pandemic levels.

Market has been rotated ahead of the Fed meeting, unhappy about the possibility that the Fed will act quickly — and asset prices rise in the process. Low interest rates and bond purchases have helped generate profits for companies and move money away from safe-haven assets like Treasury bonds and into riskier assets like stocks. Higher rates could prevent, or at least silence, the Wall Street party.

But some economists have argued that it is unlikely that central bank officials will reveal any big moves on Wednesday – they generally prefer to preview impending changes, and have not. so.

Michael Feroli, chief US economist at JP Morgan, wrote in a note ahead of Wednesday’s meeting: “A case could be made for the Fed to stop buying bonds earlier than the end of the month. 3 expected. Doing so would allow them to stop boosting the economy at a time of hot inflation, he wrote, but he doubted that would happen.

“While this can help, Fed Powell doesn’t like to shock the market on meeting days, preferring to give any indication of a pivot in speeches and media reports,” Feroli wrote. .

Much of the news from the meeting could lead Mr. Powell to strike.

Roberto Perli and his colleagues at Cornerstone Macro wrote in a pre-meeting research note: “We think he will talk about the economy without sounding apocalyptic in terms of inflation and preparedness. basis for the launch in March”. Stocks, Fed Meeting and Inflation: Live Updates

Fry Electronics Team

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