READY, SET, HIKE

The Federal Reserve (Fed) meets this week and in all likelihood will raise short-term interest rates for the first time since emergency levels of monetary accommodation were provided to markets after the COVID-19 shutdowns. Inflationary pressures are running higher than the central bankers are comfortable with, but the conflict in Eastern Europe adds to the uncertain path of policy normalization. Prospects of yield curve inversion make the Fed’s job trickier.

 INTEREST RATE HIKES ARE (LIKELY) COMING

The Federal Reserve is widely expected to increase short-term interest rates this week for the first time since emergency levels of monetary support were enacted in the aftermath of the COVID-19 shutdowns. With its asset purchase programs fully winding down last week (the Fed was buying $120 billion a month of U.S. Treasury and mortgage securities), the Fed has signaled that it is ready to take the next step towards policy normalization and is set to start a series of interest rate hikes over the coming years.