The Federal Reserve to Shift Focus to Inflation
Interest Rate Hikes Could Be Coming
With inflation continuing to climb, the Federal Reserve is likely to announce policy changes at its meeting next week. The central bank is expected to vote to wind down its pandemic stimulus bond-buying program by March. That is much faster than its previous June deadline.
By speeding up the pace of tapering, the Fed could raise interest rates as early as spring. Fed Chairman Jermone Powell, who was just granted another four-year term by President Biden, has indicated that curbing inflation will be a top priority. Therefore, it’s likely that significant monetary policy changes are on the way.
Economic Data Prompts Change
When the Fed first announced plans to wind down its bond-buying program, inflation was rising but was still expected to ease later in the year. That has not been the case, with inflation surging 5% year-over-year in October.
Other economic data is also driving the Fed to make changes. The labor market is regaining strength. Economic growth appears to be accelerating after a lull during the third quarter. As a result, many believe that the Fed does not need to keep buying bonds and keeping interest rates near record lows until June.
Fed Still Thinks Inflation Will Ease
At the policy meeting, which is scheduled for December 14 and December 15, the Fed is also expected to stop referring to inflation as “transitory.” Jerome Powell, chair of the Fed, has already said this word no longer applies to the current situation. The Fed, and many economists, still think that inflation will decline next year, though it may take until mid-2022.
Rising inflation and an economy that is recovering again are prompting the Federal Reserve to change course. The bank is focused on implementing policies which will hopefully curb persistent inflation.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.