Bruce Kasman is joined by Jay Barry, Joe Lupton, and Michael Hanson to discuss today’s FOMC meeting and the path of policy normalization across the Developed Market economies. As expected, the FOMC laid the ground work for an expected March hike and mid-year start to QT. While Chair Powell also met our expectations in eschewing the gradual adjustment guidance delivered on the eve of the 2004 and 2015 normalizations he went further by emphasizing differences that “are likely to have important implications for the appropriate pace of policy adjustments.” His hawkish comments raise the risk of a more aggressive pace of tightening and add upside risk to the interest rate outlook. We remain comfortable that the economy will prove resilient in the face of this adjustment and will rebound from an expected large Omicron drag at the start of the year.  Other DM central banks are also in motion, but at a more gradual pace on both balance sheet and rates. Importantly, this cycle should also prove different as the ECB is expected to be raising rates within a year of the start of Fed normalization.

This podcast was recorded on January 26 2022.

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