Policy

September 22, 2021

Light at the End of the Tunnel 🤞

The Federal Reserve isn’t quite ready to raise interest rates, but they’ve provided investors with high hopes for taper time later this year. 🙏

As the pandemic ramped up in early 2020, the Fed committed to purchasing $120 billion worth of Treasury and mortgage-backed securities every month. By purchasing the assets, the Fed puts its arm on the scale, which arguably keeps prices stable.

By tapering purchases of assets (namely bonds), the Fed will begin to let the market return to relative normalcy. Tapering is the step that precedes raising interest rates, which is expected to happen next year. 📈

A stronger-than-expected Summer recovery pushed forward the rate hike from 2023, but a disappointing August jobs report prompted the Fed to err on the side of caution. Federal Reserve Chairman Jerome Powell indicated that he wanted to see more progress in employment numbers before making any aggressive moves.

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After a month of the bond market pricing in the “higher-for-longer” interest rate narrative, someone finally told the stock market.

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