{"id":124085,"date":"2021-12-16T15:09:56","date_gmt":"2021-12-16T15:09:56","guid":{"rendered":"https:\/\/fin2me.com\/?p=124085"},"modified":"2021-12-16T15:09:56","modified_gmt":"2021-12-16T15:09:56","slug":"the-federal-reserve-signals-rate-hikes-in-2022","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/the-federal-reserve-signals-rate-hikes-in-2022\/","title":{"rendered":"The Federal Reserve signals rate hikes in 2022"},"content":{"rendered":"<p><em>A version of this story first appeared in CNN Business&#8217; Before the Bell newsletter. Not a subscriber? You can sign up <\/em><em>right here<\/em><em>. You can listen to an audio version of the newsletter by clicking the same link.<\/em><\/p>\n<p><cite>London (CNN Business)<\/cite>The Federal Reserve has sent a clear signal that the era of rock-bottom interest rates will end in 2022.<\/p>\n<p>What&#8217;s happening: Rates have been near zero since March 2020, when government leaders around the world shut down the economy to slow the spread of Covid-19. But on Wednesday, the Fed \u2014 in addition to announcing a faster end to its emergency bond-buying program \u2014 projected that its benchmark interest rate could rise to 0.9% in 2022.<br \/>\nThe policy pivot, which comes as inflation rises at the fastest pace in almost four decades, could have big ramifications for markets and the economy.<\/p>\n<ul><\/ul>\n<p>But Paul Donovan, chief economist of UBS Global Wealth Management, told me that it&#8217;s important to separate out what rate hikes will and won&#8217;t do.<\/p>\n<ul><\/ul>\n<p>Borrowing costs would go up \u2014 while remaining extremely depressed.<\/p>\n<p>&#8220;If you look at the real cost of capital in the broader economy, that&#8217;s still going to be very low,&#8221; he said.<br \/>\nBefore the pandemic, the Fed&#8217;s target interest rate was between 1.5% and 1.75%. That was also super low by historical standards. At the end of 2007, before the financial crisis, interest rates were at 4.25%.<br \/>\nDonovan does not think the move will have a profound effect on inflation, noting that many of the reasons prices have shot up this year \u2014 including the jump in energy prices and the cost of used cars \u2014 are tied to the effects of the pandemic and have little to do with central bank policy.<br \/>\n&#8220;The oil market doesn&#8217;t care about [Fed Chair] Jay Powell,&#8221; Donovan said. &#8220;Used car dealers don&#8217;t care about Jay Powell.&#8221;<br \/>\nIn short, the Fed wants to make sure rates aren&#8217;t too low when the economic recovery is complete so it has ammunition to fight another crisis.<br \/>\nThat doesn&#8217;t mean prices will keep climbing, however. Donovan thinks that as Americans deplete their savings from the pandemic, inflation will begin to drop &#8220;quite sharply&#8221; on its own.<br \/>\n&#8220;[Even if] the Fed does nothing, inflation comes down,&#8221; he said.<br \/>\nWhat does this all mean for markets? Donovan said the situation would be different if the Fed wanted to raise interest rates to rein in economic growth. But that&#8217;s not what he sees happening here.<br \/>\n&#8220;This is more about setting the scene for when we return to a more normal economic cycle,&#8221; Donovan said. &#8220;The Fed is not on an anti-growth campaign.&#8221;<br \/>\nThat could minimize disruption for investors \u2014 assuming the Omicron variant, or other pandemic twists and turns, don&#8217;t spoil the party.<br \/>\n&#8220;Omicron definitely has the potential to create distortions in the near-term but I don&#8217;t think it disrupts the narrative,&#8221; Donovan said. &#8220;The general story for 2022 is intact.&#8221;<\/p>\n<h3>Reddit fueled a market craze. Now it&#8217;s going public<\/h3>\n<p>Reddit was one of the driving forces behind the meme stock craze that took financial markets by storm in 2021, sending shares of companies like GameStop surging 2,700% in a matter of weeks.<br \/>\nNow, the social media site wants to raise money itself.<br \/>\nThe latest: Reddit announced Wednesday that it had confidentially filed paperwork for an initial public offering with the US Securities and Exchange Commission.<br \/>\nIt&#8217;s not clear how many shares the company wants to list, or its proposed price range. When the company announced it was raising money from private backers over the summer, it said it was valued at more than $10 billion.<br \/>\nFor comparison: Facebook, the biggest social network, is valued at more than $950 billion, while Twitter has a market value of $35 billion.<br \/>\nReddit&#8217;s Wall Street launch could garner attention from investors who have started combing through the popular WallStreetBets group in search of the next stock target of everyday investors who use apps like Robinhood.<br \/>\nRobinhood itself has had a rough year, with shares now trading at $19.50, well below their IPO price of $38. The dating app Bumble, which also went public in 2021, has seen its shares fall to $35.17 after kicking off at $43 apiece.<\/p>\n<h3>Wall Street has fallen in love with bowling<\/h3>\n<p>Bowling is thriving, and the biggest company in the business wants to cash in.<br \/>\nThe latest: Bowlero, which is the world&#8217;s largest operator of bowling centers and owns the Professional Bowlers Association, will make its Wall Street debut on Thursday following a merger with Isos Acquisition Corporation, a special-purpose acquisition company, or SPAC.<br \/>\nThe lifting of lockdowns has led to a bowling boom, my CNN Business colleague Paul R. La Monica reports. The company said third quarter revenue rose by more than 20% compared to the same quarter of 2019. Bowlero has also returned to profitability.<br \/>\nBowlero President Brett Parker told Paul that there&#8217;s still tons of room for growth, noting that there are roughly 3,500 independently-owned bowling alleys in the United States.<br \/>\n&#8220;This industry is still fragmented and ripe for roll-ups,&#8221; Parker said.<br \/>\nHe&#8217;s also interested in setting up bowling as the next TV phenomenon.<br \/>\nThe thinking: The SPAC taking Bowlero public is run by two former World Wrestling Entertainment executives. Parker said that the PBA will leverage their expertise to amp up bowling&#8217;s entertainment value \u2014 without going overboard.<br \/>\n&#8220;Nobody is going to walk up behind anybody getting ready to bowl and hit them with a chair,&#8221; Parker said. &#8220;The sport needs to maintain its integrity. But we can make it more engaging. And they know how to take something that is more of a niche product and bring it mainstream.&#8221;<\/p>\n<h3>Up next<\/h3>\n<p><span>Adobe<\/span> <span>(<span>ADBE<\/span>)<\/span> reports results before US markets open. <span>FedEx<\/span> <span>(<span>FDX<\/span>)<\/span> and Rivian follow after the close.<br \/>\nAlso today:<\/p>\n<ul><\/ul>\n<ul>\n<li>US housing starts and building permits for November arrive at 8:30 a.m. ET, along with initial jobless claims for last week.<\/li>\n<li>The flash reading of the IHS Markit Purchasing Managers&#8217; Index, a closely-watched gauge of economic health, follows at 9:45 a.m. ET.<\/li>\n<\/ul>\n<p>Coming tomorrow: The Bank of Japan caps off a big week of central bank announcements.<br \/>\nSource: <a href=\"https:\/\/edition.cnn.com\/2021\/12\/16\/investing\/premarket-stocks-trading\/index.html\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A version of this story first appeared in CNN Business&#8217; Before the Bell newsletter. Not a subscriber? You can sign up right here. You can [&#8230;]<\/p>\n","protected":false},"author":3,"featured_media":124084,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Federal Reserve signals rate hikes in 2022 - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/markets\/the-federal-reserve-signals-rate-hikes-in-2022\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Federal Reserve signals rate hikes in 2022 - Fin2me\" \/>\n<meta property=\"og:description\" content=\"A version of this story first appeared in CNN Business&#8217; Before the Bell newsletter. 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