The Federal Reserve might speed up its end of the bond-buying programme and announce that 2022 will be the year they expect to begin raising interest rates.

This is a trend that investors have been anticipating, even before Wednesday’s Fed meeting. Strategists don’t expect much market reaction,Except if the messaging from central banks includes surprises or if its prediction for rate increases is aggressiver than anticipated,

Federal Reserve Chairman was testifying before a Senate panel in November 30 Jerome PowellThe central bank was warned that they would be discussing the matter speeding the taper of its $120-billion monthly bond purchasesat the meeting. He then made some comments. a parade of Fed speakers,They all thought the central bank should end the program before the deadline of June 2022.

Stocks have climbed back to their highs over the last week after Covid’s omicron version was revealed not to be causing a shut down of the economy. Pfizer and BioNTech also gave investors some encouragementWhen they announced that three doses were sufficient to protect against the variant.

The market is largely unattractive to investors November’s inflation print in which the consumer price index gained 0.8% for the month and 6.8% over the previous year — the highest rate since 1982. The core CPI, which excludes food and energy prices, climbed 0.5% for the month and gained 4.9% from a year ago — the sharpest increase since 1991.

Bond yields rose over the past week, however the 10-yearThe Treasury yield was at approximately 1.47% on Friday afternoon.

David Bianco from DWS Group, chief investment officer of the Americas said that “the bond market takes some comfort in knowing the Fed is doing its job to tackle inflation.” To put it in perspective, back in the 1960s the average hike cycle was 400 basis point. One basis point equals 0.01 percent. It would be four percentage points of rate rises.

“Since 1982, the average hiking cycle has been more than 250-300 basis points, depending on whether you begin with the post great inflation period of 1970s and 1980s. We reached 225 in the last cycle. [2.25%]Bianco said.

“We have seen that it took less. He suggested that maybe there is a silver lining to the fact that inflation has surprised the Fed. The Fed is responding quicker and the message has been received from the fiscal side. They are now spending more correctly sized and focused.

Bianco anticipates that there will be two quarter-point rate increases next year. The first is expected to take place in June. Although the Fed may raise interest rates up to four times next year, Bianco does not anticipate the Fed raising the Fed funds rate much more. The fed funds interest rate is at the rate that large banks lend one another overnight.

This November: the Fed announcedIt would end its monthly bonds purchases of $120 billion at $15 billion per month. Strategists believe it will speed up the process. may finish by March.

Quantitative easing was a bond-buying program that was established in 2020 in order to support the financial market and the economy in coping with the effects of the pandemic. Also, the Fed had reduced its Fed funds target rate quickly to zero.

its last forecast,According to the Fed’s dot-plot graph of inflation forecasts, half of the Fed officials predicted one or more rate rises in the next year. But there was not consensus. In 2023, the first rate hikes took place. The updated forecast shows that this is unlikely to change with at least two more hikes planned for the next year.

Powell’s testimony also revealed that inflation may be a greater problem than what the central bank believed. time to retire the description of inflation as “transitory,”Or temporary. The consumer price index rose to its fastest pace in almost 40 years for November.

Bianco indicated that investors are now focused on the economy. This is a significant improvement over the 3.1% annual growth rate in the third-quarter. The fourth quarter is expected to see an average of 7% growth in gross domestic products, according the economists. CNBC/Moody Analytics Rapid UpdateSurvey of economists.

The cycle has aged rapidly in many respects. Bianco noted that the cycle is currently seven years old and has already been two years.

Credit Suisse senior equity strategist Patrick Palfrey said that the Fed is moving closer to increasing interest rates and the market should be focusing on the economy. Palfrey explained that strong economies allow central banks to increase interest rates. Markets should also continue rising.

Credit Suisse strategists raised their 2022 forecast for the S&P 500 to 5,200The strong economy, improving earnings and margins have all contributed to the positive performance of this week.

Palfrey explained that although the Fed has changed its messaging about “transitory” recently, in fact, many investors have been watching the yield curve, inflation and various dynamics as well. It is not surprising that many market participants found the Fed behind the curve and required them to change their policies.

Week ahead calendar

Tuesday

Fed opens two-day meeting

NFIB Small Business Survey at 6:00 AM

8:30 a.m.

Wednesday

Earnings: Lennar, Trip.com

Mortgage applications at 7:00 am

8:30 a.m. Empire manufacturing

9:00 a.m.

8:30 a.m. 8:30 a.m.

NAHB 10:00 AM

2:00 p.m. FOMC rate decision

Briefing by Jerome Powell, Fed Chairman

4:00 p.m. TIC Data

Thursday

Earnings: FedEx, Adobe, Accenture, Jabil, Rivian Automotive, Steelcase

8.30 a.m. Jobless claims

8:30 a.m. Building permits

8:15 a.m. Starts Housing

9:00 a.m. Philadelphia Fed

9:00 a.m. Production/capacity utilization

Friday

Earnings: Darden Restaurants, Winnebago