The Federal Reserve's meeting, scheduled for January 25-26, may dominate events in the financial markets next week. Expectations go as high as that we may hear about an immediate end to asset purchases instead of the currently signaled mid-March deadline.
In a situation where economic losses from the pandemic have been successfully recovered, unemployment has fallen below 4 percent and inflation is close to a 40-year high, further stimulation of the economy seems unjustified. This also seemed to be the tone of recent U.S. President Joe Biden, who stated that the Federal Reserve should recalibrate monetary policy.
Investors can expect an indication from the Federal Reserve that March is a likely date for a possible interest rate hike. In doing so, the Fed may reaffirm expectations that the balance sheet will begin to be reduced later in the year.
However, Fed policymakers may note some caution regarding near-term economic activity associated with the outbreak, as the omicron variant may have increased caution among consumers and reduced their spending. Additionally, increased worker absenteeism for health reasons could also hit the economy during the December-January period. Nevertheless, the Covid number appears to have peaked, and a rapid economic rebound in February and March could allow the Fed to raise rates by 25 bps on March 16.
If that happens, investors may wonder how the path of interest rate hikes in 2022 will unfold? And could there be three or four hikes, or another surprising development?
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.17% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
