Hawkish Powell consistent with March rate hike

In his Senate re-nomination hearing today, Fed Chair Jerome Powell echoed the increasingly hawkish rhetoric coming from other officials. We expect the fed funds policy range to reach 1.00% to 1.25% by end-2022 and 2.00% to 2.25% by end-2023.
Paul Ashworth Chief North America Economist
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US Chart Book

Omicron impact short-lived

The surge in Omicron infections means more people were self-isolating in early-January than at any time since the beginning of the pandemic, although the impact that will have on employment and output remains uncertain. Furthermore, with cases now falling just as quickly as they rose, any effects will be quickly reversed in February. In contrast to earlier waves, the rise in infections hasn’t prompted as big a pullback in services activity, with fears of catching the virus lower than during previous waves. The far bigger factor this time is staff absenteeism, which we think will cause both payroll employment and manufacturing output to decline in January, although the impact should be mostly reversed by the end of the first quarter.

24 January 2022

US Economics Weekly

Omicron reaches plateau, leaving Fed free to hike

We expect the Fed to deliver some heavy hints at next week’s FOMC that it is planning an interest rate hike in March. With the Omicron wave now past its peak nationally, there is little to hold the Fed back, particularly if next week brings news of a further acceleration in wage growth.

21 January 2022

US Economic Outlook

Inflation to remain elevated as GDP growth slows

We expect underlying inflation to remain well above the 2% target this year, which means the Fed will push ahead with four rate hikes even though real GDP growth is likely to disappoint. Core inflation will average 4.3% in 2022 and close to 3.0% in 2023. GDP growth will slow to 2.7% this year and 2.0% in 2023.

20 January 2022

More from Paul Ashworth

US Economics Weekly

Omicron surging; Fed in hawkish mood

The surge in Omicron infections has quickly developed into a full-blown tsunami, with the seven-day national average now close to 600,000 – three times higher than the previous peak last winter. The increase in absenteeism caused by the Omicron wave will only compound the acute labour shortages that developed last year, putting even more upward pressure on wages and prices.

7 January 2022

US Economics Update

2022: High inflation to drive US policy tightening

We expect inflation to remain stubbornly high in 2022, forcing the Fed to tighten monetary policy aggressively even though real economic growth underwhelms. The chances of additional fiscal stimulus have dwindled and will drop off the table entirely if the Republicans win back control of both the House and/or Senate in November’s mid-term elections. The sheer magnitude of Omicron infections will weigh on employment and economic activity in the next few months, but some of the output will be made up later this year.

5 January 2022

US Chart Book

Winter virus wave to slow economic momentum

The Omicron variant has supercharged the seasonal wave of virus cases sweeping parts of the US, adding to the existing headwinds to consumption growth over the coming months. In contrast to governments in Europe, however, there are still few signs of state or local governments moving to reimpose meaningful restrictions on activity and any voluntary pull-back in activity has, for now, been modest. We had already expected that, with real incomes falling and confidence slumping as the earlier fiscal support fades and surging prices take their toll, real consumption growth would slow over the coming months. The rapidly deteriorating virus situation, and the prospect of at least a temporary disruption in child tax credit payments, only add to the downside risks.

21 December 2021
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