Opening Statement from the December 2021 Intelligent Investor (part 1)
Originally published on December 8, 2021
The Fed, Interest Rates, the Taper and Omicron
Over the past several weeks we have been discussing the need for the Fed to accelerate its taper schedule in order to create adequate flexibility to deal with what is beginning to look like a more prolonged inflation problem (Securities Analysis & Trading Webinars).
On November 28, Fed chairman Powell stated that inflation appears to be less transitory. Thus, he stated the Fed would consider accelerating the taper schedule first announced in November when the Fed meets on Dec 14-15.
We are concerned that the Fed might scratch plans to accelerate the taper if the Omicron variant gets out of hand. We believe the taper should be accelerated regardless how the Omicron variant plays out because inflation is becoming a significant risk. The tight labor market remains a significant problem that is not likely to go away anytime soon. Furthermore, we believe that if the Omicron variant becomes problematic it is likely to worsen supply chain problems, which will add to inflation.
We have been forecasting...
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