The Federal Reserve announcement on Wednesday is expected to cause equity markets to gain some ground, but there are still some concerns about the outcome.
Today’s announcement, forecasts, and commentary will set the scene for next year, in particular the first quarter which is still fraught with uncertainty over just how far the central bank will go.
This year, policymakers made it clear that the goal of regaining control over inflation is priority number one. The two are interconnected and the central bank has always maintained that a soft landing was possible. Recent inflation data suggests that it could be possible.
Yesterday’s CPI data was very welcomed by the investment community, confirming once more that inflation is heading in the right direction, finally, and at a pace – much like the ascent this year – that’s exceeding expectations. Given that rate increases work with a delay, they should prove more effective in the new year.
However, there will be an economic price and stubborn wage growth could put a halt to the Fed returning inflation back to target. The Fed will be able to rest easy with the CPI reports that were released last week.