Markets are rocketing.
The Dow is up 361. The NASDAQ is up 304. The S&P 500 is up about 70.
All after the Federal Reserve said they would wind down pandemic stimulus efforts faster than expected. At the moment, the Fed plans to reduce its monthly Treasury bond purchases by $20 billion, and its mortgage bond purchases by $10 billion.
Now, according to CNBC, “The Fed will be buying $60 billion per month of bonds starting in January, down from December’s rate of $90 million, and said that it will likely continue that trajectory in the months ahead.”
At the same time, the central bank has projected three interest rate hikes in the new year, as it moves to fight hotter than expected inflation.
All after the Fed learned inflation wasn’t transitory.
Over the last few days, we learned the producer price index shot to its highest level on record of 9.6% over the last 12 months. If we strip out food and energy, PPI was still up 6.9%, the biggest increase in seven years. That followed news the consumer price index (CPI) jumped 6.8% year over year – its highest reading since June 1982.
As noted by CNN, “The central banks had been adamant that current inflation will only be temporary, but as it has dragged on and gotten worse, that description [transitory] seemed less and less appropriate.”
With some uncertainty now removed, markets could run to higher highs.
