JJ Kinahan, Chief Market Strategist, TD Ameritrade
(Wednesday Market Close) The Federal Open Market Committee (FOMC) ended its two-day meeting on Wednesday with its customary interest rate decision announcement and press conference. After the December Consumer Price Index (CPI) reported inflation grew at 7.1% year over year, the market started to expect the Fed to hike the overnight rate to 0.25% in March.
In the announcement, the Fed stated that it wasn’t going to raise rates. As far as rate-hike guidance, the Fed simply reiterated what it has said before, that it would “continue to adjust as needed.” In a separate announcement, the Fed said it plans to reduce its balance sheet after it starts hiking interest rates.
During the press conference, Chair Powell was unwilling to state whether the Fed would raise rates each meeting or every other meeting and that it basically wants to keep its options open. He did clarify that the committee would defer the decision to raise the overnight rate in March at the March FOMC meeting. So, the market has been projecting three to four rate hikes in 2022, but the Fed wasn’t willing to make that commitment. However, Powell didn’t rule out any of these possibilities, nor did he rule out raising rates more than a quarter point at a time. The Fed has stuck with quarter-point adjustments for more than two decades to keep a measured approach to interest rate changes.
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