Fed Chair confirmed a 25 bp rate hike this month
Fed’s Beige Book was released a few minutes ago. The report reiterated the economy expanded at a “modest to moderate” pace. Many Districts reported that the surge in Covid cases and severe winter weather disrupted businesses. Some firms noted a “temporary” weakening in demand in the hospitality sector to Covid.
“All Districts” said supply chain issues and low inventories continued to restrain growth, especially in construction.
The overall outlook for the next 6 months remained one of stable and general optimism, though with elevated uncertainty.
For the labor market, the widespread strong demand for labor was hampered by “equally widespread reports of worker scarcity.”
Meanwhile, Fed Chair Powell’s testified before the Congress today. He confirmed a 25 basis points rate hike is in the cards for the March 15-16 meeting.
FOMC as policymakers look to address “indisputably” high inflation pressures. He also suggested more aggressive increases could be warranted down the road. Powell said liquidity has been functional thanks to a number of measures and facilities put in place, including swap lines and the standing repo facility.
The Fed has “institutionalized liquidity provisions” — hence the geopolitical pressures have not added stresses in the funding markets.
The markets are sharply higher across all sectors.
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