The article discusses the upcoming Federal Reserve (Fed) meeting, where officials are expected to deliver one of the most hawkish pivots in years. The pivot refers to a shift towards a more restrictive monetary policy stance, which is likely due to rising inflation concerns.
Key points from the article include:
- Rising inflation: Consumer prices have risen 6.2% in October and 6.8% in November, the fastest rate since 1982.
- Powell’s pivot: Fed Chairman Jerome Powell has taken a more hawkish stance on tapering, citing concerns about inflation.
- Rate hike expectations: Economists expect the Fed to raise interest rates earlier than previously thought, with some predicting two hikes in 2022.
- Inflation forecasts: The Fed is expected to revise its inflation forecast for 2022, raising it to 2.5%.
- Unemployment: Unemployment is predicted to fall to 3.7% by the end of 2022, below the Fed’s long-term forecast of 4%.
- Omicron impact: The new omicron variant of Covid-19 may reduce US growth modestly but boost prices.
- Fed nominations: President Biden has renominated Powell and named Lael Brainard to be vice chairman, with three other slots still open on the Fed board.
The article concludes that the Fed’s pivot towards a more hawkish stance is likely due to concerns about inflation, which may continue to rise due to various factors, including the impact of the omicron variant.
