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Thursday, December 16, 2021

Synopsis of US FED meeting.

Let's take a look at the latest FED dot plot chart first.  Basically, the chart is showing that there will be 3 rate hikes in 2022 and up to 4 rate hikes in 2023.

Let's compare the latest chart with the previous chart.  We could see that nobody was projecting the interest rate to hit beyond 0.75% in 2022 in the previous chart.

GDP and PCE data:

From the above table, we can see that the US will be experiencing diminishing GDP growth.  Furthermore, the core PCE inflation (FED's preferred inflation indicator) will be above 4% by the end of 2021.

We can conclude that the US will be facing a strong headwind in 2022 because it is never a good idea to increase interest rates when the GDP growth is declining.

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