Monetary policy

The FOMC of January 26, 2022 was eagerly awaited. The minutes of the previous committee, had shown that a balance sheet reduction was seriously considered, which had triggered a major correction in the equity markets. Analysis by CPR AM experts...

2022 will be a new year in more ways than one. After more than a decade of monetary stimulus, the US Federal Reserve has signaled that it will raise interest rates and reduce support for the economy and asset prices.

Edward Al-Hussainy, Senior Interest Rate and Currency Analyst at Columbia Threadneedle Investments on monetary policy in 2022 and its implications for rates and the yield curve.

The ECB sees inflation pressures as temporary and is unlikely to raise interest rates. The eurozone economy has outperformed consensus estimates as it grew by 2.2% quarter-on-quarter in Q3, matching the previous quarter. This leaves the level of economic activity just 0.5% below its pre-pandemic peak, meaning that the recovery in GDP should be complete this quarter (Q4).

While the idea that accommodative monetary policies imply an increase in inequalities, a research paper presented at the Jackson Hole central bankers conference reverses the causality and tends to suggest that it is the rise in inequalities that causes the decline in equilibrium interest rates.