Wednesday 15th December 2021Markets are still pulled in two directions. First there’s the continued uncertainty of the new COVID variant, which might be mild (or not), but is spreading like wildfire in the UK right now and the race is on to have booster jabs across the globe. Then there’s the inflation question and how quickly central banks will respond to it. A sharp increase in producer prices in the US has added to the ammunition for the Fed to move faster, with the next FOMC meeting tomorrow. It is assumed QE will end in March, the question is how many dot points for rate rises are expected next year. Whilst the Fed might predict two, markets are pricing for three. NAB’s Rodrigo Catril says if the FOMC suggests three, the markets might move their expectations to four. It seems whatever the Fed chooses, markets expect more!
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