The lasting impact – or unintended consequences – of the unprecedented fiscal and monetary response to the COVID-19 outbreak and ensuing global pandemic remains unknown.
The economic recovery has been underway, but the recovery remains far from complete as continuous circumstances of the pandemic persist. The recurring emergence of COVID-19 variants keeps added pressure on the economy.
Federal Reserve (Fed) officials formally announced the beginning of its tapering process following the November Federal Open Market Committee (FOMC) meeting. The asset purchase program is set to conclude in June 2022, assuming the outlined schedule is maintained. The presumed next step in rolling back accommodation after concluding the asset purchase program is rate hikes – the component on which investors are focused.
The Fed recently acknowledged that inflation is no longer in a transitory state. Consumers and businesses alike have continued to feel the impact of higher prices as their spending power has declined. This shift on inflation from the Fed fell in line with the market sentiment that elevated inflation pressures, and rising inflation expectations may be more than just temporary.