2024 Markets: Fed’s Influence on Pace Set to Increase

TL/DR –

The article discusses the surge in consumer prices that led to inflation surpassing the targets set by central bankers, resulting in a series of interest-rate hikes. The actions taken by policymakers, with the intention of regaining their credibility in managing monetary stability, risked negatively impacting growth and potentially leading to unemployment. Recently, there has been a pause in the interest-rate hikes, which is expected to be followed by a policy easing.

Impact of Inflation Surge on Interest Rates and Unemployment

In recent years, rising consumer prices catapulted inflation past central bank targets leading to a significant increase in interest rates. Policymakers, in their quest to restore their reputation as monetary stability watchdogs, risked stunting growth and precipitating unemployment. However, the recent pause in rate hikes is now anticipated to transition into a policy relaxation phase.

Significance of the Federal Reserve’s Next Move

The Federal Reserve’s forthcoming actions will play a pivotal role in determining the behaviour of financial markets in the upcoming year, as indicated by the charts below. The decision will indeed be instrumental in shaping the financial landscape.

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