Many economists are anxious to learn the timing of the year’s first rate increase.
The importance of each monthly meeting of the Federal Reserve Board ebbs and flows in relation to the economic environment surrounding each meeting. When the pandemic first hit and major parts of the economy shut down, all eyes were on the Fed as they came to the rescue. Since that time, each meeting became more or less the same old story -- until recently.
This week the Fed meets for the first time in 2022, and there are lots of questions swirling around the event. The main topic will be inflation. High levels of inflation have caused the Fed to move more quickly to remove their support for the economic recovery. Late last year they started tapering their purchases of bonds and mortgages. Then they increased the pace of tapering and talked of rate increases in 2022. What next?
Fed watchers will be looking hard at any hint regarding the timing of the first increase. Most are not expecting it to happen this week, with March the betting favorite right now. In addition to the Fed meeting, we will also see the first estimate of economic growth for the 4th quarter. This will be followed by the jobs report for January, to be released at the end of next week. This “trifecta” of economic events may tell us more about the direction of the economy and interest rates starting off the year.