The US Federal Reserve’s (Fed’s) policy statement on Wednesday, following the Federal Open Market Committee (FOMC) meeting, delivered a hawkish surprise to the market as the Fed Chair, Jerome Powell, reiterated the FOMC’s position that short term interest rate hikes are imminent and that increases in the Fed’s balance sheet will cease in early March 2022. While noting the uncertainties facing the US economy, Powell was optimistic about economic growth prospects and cited a strong labour market recovery as one of the reasons that the economy no longer needed sustained high levels of monetary policy support. This statement, and his speech’s emphasis on the possibility of core inflation proving sticky, gives the Fed room for a more hawkish strategy down the line
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