The Fed is likely to signal a March interest rate hike and that further policy tightening is coming

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The Fed is likely to signal a March interest rate hike and that further policy tightening is coming
PUBLISHED TUE, JAN 25 2022 by Patti Domm CNBC

KEY POINTS:

• The Federal Reserve is expected to signal at its meeting this week that it is ready to raise interest rates as soon as March and that it will consider other policy tightening.
• The Fed issues its policy statement Wednesday afternoon, at the end of its two-day meeting, and it is expected to show that it is willing to take the steps necessary to fight inflation.
• “I don’t think they’re going to be spooked by this,” said one strategist of the stock market’s correction. “They need to tighten financial conditions so they can have a better handle on inflation.”

The Federal Reserve is expected to signal at its meeting this week that it is ready to raise interest rates as soon as March and that it will consider other policy tightening, reversing the easy policies it put in place to fight the pandemic.

The Fed begins its two-day meeting Tuesday, and on Wednesday afternoon, the central bank is expected to issue a new statement that shows it is resolved to fight inflation. Against the backdrop of a violent stock market correction, Fed officials are expected to say they are ready to push up the fed funds rate from zero as soon as March.

“We don’t expect them to sound dovish,” said Mark Cabana, head of U.S. short rate strategy at Bank of America. “The [bond] market seems to be reacting to the drop in equities, plus the geopolitical tensions, so maybe the Fed sounds not as hawkish as they otherwise would have. But we don’t think the Fed is going to come out and tell the market it’s wrong for pricing in four rate hikes this year.” For more on this CNBC

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WORLD ECONOMY
IMF sees potential for further market turbulence as central banks hike rates
PUBLISHED THU, JAN 27 2022 by Karen Gilchrist CNBC


The International Monetary Fund has warned of further turbulence ahead for financial markets, particularly as governments around the world shift gears into recovery mode.

Central banks’ moves to tighten monetary policy and curb rising inflation could push riskier stocks deeper into the red even as policymakers pledge a smooth transition, the IMF’s Tobias Adrian, financial counsellor and director of monetary and capital markets, told CNBC’s Geoff Cutmore. Full article on CNBC

[MongiIG]

Facing both turbulent financial markets and raging inflation, the Federal Reserve on Wednesday indicated it could soon raise interest rates for the first time in more than three years as part of a broader tightening of historically easy monetary policy.

In a move that came as little surprise, the Fed’s policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the first rise since December 2018.

 

Chairman Jerome Powell added that the Fed could move on an aggressive path. Full article CNBC