Daily Column – 27th January 2022


The Federal Reserve plans to raise interest rates in the spring, when we won’t have to worry about bombogenesis or dry skin. The central bank said yesterday that it will do this.

If inflation is above 2% and the job market is healthy, the Fed thinks it will soon be time to raise its target range for the federal funds rate.

“After our next meeting in March, we may raise interest rates.”

History books will remember it. Because it’s the first time since 2018 that the Fed has raised borrowing costs, it will show that the economy is on the road to recovery. The Fed lowered interest rates to near zero in Covid, which is when the economy was in its worst shape.

So, of course, the Fed wasn’t always going to raise interest rates this March, but high prices changed the equation. Everyone from President Biden to Federal Reserve officials to Chicago-based options traders has been getting more and more worried about rising prices. This led the Fed to change its course in December and start planning for several rate rises this year.

From Wall Street, this is the view.

A lot of people are worried about rising interest rates, which makes tech stocks less appealing when bond yields rise. This has hurt the stock market this year (as they have been).

When it comes to this year, the S&P 500 is down 9.31 percent so far. This would make it have the worst start to a year in history.

This year, the tech-heavy Nasdaq has lost about 15% of its value so far this year.

It’s not always true that a rise in interest rates means bad news for the stock market. There’s nothing wrong with that at all, in fact. Truist co-chief investment officer Keith Lerner says that the S&P 500 has made money in 11 of the 12 Fed rate rise cycles since the 1950s.

Why? So, when the economy is growing, interest rates are likely to go up. This is good news for corporate earnings because a growing economy is usually good news for them.

Looking at the next few years… How many times will the Fed raise rates this year? It looks like Goldman Sachs thinks the Fed will raise interest rates four times this year. Powell didn’t rule out a rise at every one of the Fed’s seven remaining meetings this year to keep inflation levels from getting “just a little worse.”

If you want more information on the Fed, we talked to Christopher Leonard, author of The Lords of Easy Money, a new book that says the central bank has been a big source of inequality over the last few decades. You can read more about the book here.


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