After what has been a solid month for equities and bond investors, month end flows have probably play their part in the price action overnight, US equities have lost momentum, UST have led a rise in core global bond yields and the USD is stronger. US and European inflation releases favoured the notion the Fed and ECB are done with their respective tightening cycles.
US Economic Update – 20 January 2022
Fed policy tightening brought forward.
- Q4 GDP growth expectations have lowered but still look robust.
- The current COVID-19 wave is likely to lead to a soft start to 2022 but demand for labour remains high and the unemployment rate continues to fall rapidly.
- As a result, we now expect the Fed to start lifting the fed funds rate at its March meeting.
- We also expect the Fed to announce the end of its asset purchases at the January meeting with an unwinding of its balance sheet (“QT”) likely to start towards the end of 2022.
Find out more in NAB’s US Economic Update (January 2022)