Stocks, Fed Meeting and Inflation: Live Updates

Picture Wall Street investors will be watching closely for comments from Federal Reserve Chairman Jerome Powell after the Fed’s polic...

PictureWall Street investors will be watching closely for comments from Federal Reserve Chairman Jerome Powell after the Fed's policy meeting ended 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 rate hikes are imminent as policymakers react to the strengthening economy and maneuver to keep price gains in check in a context of rising inflation.

Economists do not expect the Fed to raise rates, which are pegged at near zero, at this meeting, and officials will not release new economic projections until March. But the January announcement comes as the Fed moves away from a policy framework that fuels the economy and towards one that will keep consumer and business demand in check – promising to make this a closely watched event. on Wall Street.

Investors Fed officials await to start raising their key interest rate in March and to make four increases in total this year, measures that will make it more expensive to borrow to buy a house, a car or new business equipment. Policymakers are already winding down a bond-buying program they used to bolster the economy by keeping long-term interest rates low, and they reported that they might start to reduce their asset portfolio soon after they start raising rates.

Officials have clearly planned a trio of policy measures, but investors are watching to see how aggressively the Fed is implementing them. Will policymakers simply let the short-term debt on their balance sheets run its course without reinvestment – ​​allowing securities to “flow” – or will they actively sell bonds to remove support even more quickly? economy? Will they raise rates three times this year, as their December economic projections suggested, or will they make further increases?

The central bank’s policy announcement may not answer all of these questions, but it will be followed by a press conference with Jerome H. Powell, the Fed Chairman, and market participants will analyze its words for any hint of how quickly the Fed plans to act. .

Economists have begun to question whether the policy-setting Federal Open Market Committee could follow a fast track to higher interest rates as prices rise higher. fastest pace in 40 yearswage growth is strong and the coronavirus lingers, dashing hopes that the economy will return to some sort of more normal trajectory in which workers return to the labor market to ease shortages.

“We see a risk that the FOMC will want to take tightening action at every meeting until this situation changes,” Goldman Sachs economists wrote in a note analyzing the central bank’s meeting this week.

Fed officials expect price hikes – which came at 5.7% in November, depending on their preferred measure – in moderation to their 2 percent goal this year. Even so, they recognized that there is a risk of them remaining elevated for an uncomfortably long period. Unemployment has fallen rapidly and may soon return to pre-pandemic levels.

Markets twirled ahead of the Fed meeting, unnerved by the possibility of the Fed acting quickly – and driving down asset prices in the process. Low interest rates and bond purchases helped make companies profitable and drove money out of safe assets like Treasuries into riskier assets like stocks. Higher rates could stop, or at least calm, the party on Wall Street.

But some economists have argued that central bank officials are unlikely to unveil big changes on Wednesday – they generally prefer to forecast changes are imminent, and have not.

“One could argue for the Fed to stop short” on bond purchases earlier than its scheduled March end date, Michael Feroli, chief U.S. economist at JP Morgan, wrote in a note ahead of Wednesday’s meeting. This would allow them to stop stimulating the economy at a time of high inflation, he wrote, but he doubted that would happen.

“While it may have merit, Powell’s Fed has been loath to shock markets on meeting days, preferring to flag any pivot in speeches and media reports,” Feroli wrote.

Much of the news from the meeting could be boiled down to Mr. Powell’s tone.

“We believe he will talk about the economy without sounding apocalyptic about inflation and set the stage for a takeoff in March,” wrote Roberto Perli and his colleagues at Cornerstone Macro in a research note ahead of the meeting.

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Newsrust - US Top News: Stocks, Fed Meeting and Inflation: Live Updates
Stocks, Fed Meeting and Inflation: Live Updates
Newsrust - US Top News
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