- Oct 25, 2021
- Reaction score
Federal Reserve Outlines Asset Purchase Tapering Plan and Rate Hikes for 2022
Since the onset of Covid-19 in the United States, the U.S. Federal Reserve initiated a monetary easing policy like no other in history. The move has led to a
In addition to the tapering of QE, the FOMC members also
“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation,” the FOMC said on Wednesday. Furthermore, the FOMC statements said Covid-19, and new coronavirus variants, have affected the U.S. economy a great deal.
‘Buy Rumors, Sell Facts’: Global Markets and Bitcoin Rise Following the FOMC Meeting
Despite the taper statements and disclosing that there will likely be three rate hikes next year, the Fed’s comments saw a market reaction opposite to what was predicted before the taper announcement. Nasdaq, NYSE, and the Dow Jones all saw gains after the FOMC meeting concluded. Speaking with Bitcoin.com News, Alex Kuptsikevich, the Fxpro senior market analyst, said the Fed “held the most hawkish edge of market expectations” on Wednesday.
“The FOMC announced that it would double the pace of tapering,” Kuptsikevich said. “The committee’s updated forecasts suggest three key rate hikes in 2022, although only six months ago, it expected none. We also heard that the balance of the Fed’s targets allows a rate hike to begin before achieving full employment due to higher inflation.”
“The Fed chairman also called financial asset valuations ‘elevated,’” the market analyst continued. “This is a clear signal of a willingness to hurt the markets, as he did in 2018. During the press conference, Powell noted that FOMC did not yet have a consensus on the timing of the Fed’s balance sheet cut. In the previous stimulus wind-down cycle, this was not an actual issue long after the start of the rate hike — The dollar index rallied within the first minutes after the FOMC, touching the highs from July 2020, but then it turned back down, losing 0.8% from the peak at the time of writing.”
The feeling is that the markets have prepared for a risk-on, expecting softness from the Fed, and have not backed down despite the Fed’s rhetoric. Some commentators believe we saw a classical ‘buy rumours, sell facts’ reaction. However, the rise in ‘growth’ stocks speaks more about the market mood to end a strong year on a cheerful note. At the same time on the dollar, a wave of profit-taking growth in the last six months seems to have started, although the Fed’s stance is much more hawkish compared to other central banks from the DXY basket.
Bank of England Raises Benchmark Rate, European Central Bank Keeps Rates Held Down, US Jobless Claims Still Above Pre-Pandemic Levels
In addition to the FOMC meeting, the Bank of England (BoE) kicked up its benchmark rate to 0.25% from 0.1%. No other central banks have done this yet and the European Central Bank, like the Federal Reserve, kept its benchmark interest rate suppressed for now.
The European Central Bank explained that it will not raise borrowing rates until inflation settles. In addition, the U.S. weekly jobless claims
What do you think about the Federal Reserve’s taper process and discussions about raising the benchmark rate three times in 2022? What do you think about the Bank of England raising its benchmark rate for the first time since the onset of the Covid-19 pandemic? Let us know what you think about this subject in the comments section below.