The American economy closed out last year on an upbeat note, finishing with a 6.9% growth rate in the fourth quarter on a seasonally adjusted annualized pace, according to Commerce Department data released on Thursday. For the full year, growth advanced by 5.7%, the strongest rate since 1984. The increase was driven by a strong rebound in the ... READ MORE >
Federal Reserve
Fed to use conventional and unconventional tools to obtain price stability
The Federal Reserve on Wednesday signaled that it intends to use both conventional and unconventional tools to address risks to the economic outlook caused by inflation even as the economy remains short of full employment. The major changes to the Federal Open Market Committee statement released after the FOMC's meeting imply that policy normalization ... READ MORE >
FOMC preview: Shaping expectations for a major policy shift
The policy objective at Wednesday’s meeting of the Federal Open Market Committee will be to prepare market participants for the major shift in policy that lies ahead: a rate hike in March, another in June, and a balance sheet runoff likely to start in June or July. Policymakers and investors should anticipate no change in the policy rate but should ... READ MORE >
How the Fed plans to use its balance sheet to craft a soft landing
Key takeaways The Fed will begin reducing its balance sheet by midyear. Expect a roll-off of $2.85 trillion by the end of 2024. The roll-off can be put on hold if economic conditions merit. The Fed is unlikely to sell assets back into the market under current conditions. Risks to the economic outlook from inflation have prompted the Federal ... READ MORE >
RSM US Financial Conditions Index: A move toward normal
After nearly two years of extreme accommodation in the financial markets, the RSM US Financial Conditions index stands at 0.96 standard deviations above neutral—a decline from the elevated levels during the pandemic and a sign that markets are starting to price in more risk. The index’s more modest level almost certainly reflects the Federal Reserve’s ... READ MORE >
Price stability now a paramount concern as inflation hits 7%
Price stability: Learn it, know it and love it because that is what the Federal Reserve will be talking about over the next two years as the central bank attempts to craft a soft landing following an increase in the Consumer Price Index to a 7% annual rate in December. The Consumer Price Index data released on Friday, though, implies anything but ... READ MORE >
Monetary and fiscal policy in a changing economy: The Fed’s mandate for price stability
This is the second of four articles examining monetary and fiscal policy and the Federal Reserve’s response to the most significant issues of today’s economy. The first article examined the Fed’s challenge in meeting its mandate for full employment. In the year ahead, the economy and financial markets will be influenced by how the Federal Reserve strikes ... READ MORE >
U.S. December jobs report: Economy has strongest year of job creation on record
Recovery, resilience and reimagination are apt descriptions of the American economy two years into a debilitating pandemic. Like a bruised prizefighter in the late rounds of a championship match, the American economy closed the year on a strong note by adding 199,000 jobs in December. Once one accounts for upward revisions to previous months by the ... READ MORE >
FOMC meeting: Setting the stage for three rate hikes in 2022
The Federal Reserve on Wednesday set the stage for multiple increases in the federal funds policy rate next year by accelerating the tapering of asset purchases to $30 billion per month, up from $15 billion. The tapering should be wrapped up by March. This provides increased flexibility for the central bank to hike rates as early as March, which will ... READ MORE >
U.S. Consumer Price Index: Inflation broadens out as shelter costs rise by 4.8%
November inflation data, rising by 6.8% on the year, offered no relief for American households as energy and transportation costs continued to drive prices higher. While there is some relief over the horizon on both fronts—falling oil and gasoline prices, as well as the return of North American auto production—investors and policymakers are turning ... READ MORE >