Federal Reserve, dovish and hawkish times in Washington D.C.
Ahead of this week’s long-awaited FOMC meeting, the Federal Reserve is faced with a critical decision. It holds a tremendously large balance sheet and is transitioning to higher interest rates, after tapering its asset purchases. Critics believe that the central bank needs to urgently apply ‘quantitative tightening’ and, in turn, reduce its balance sheet. In the upcoming meeting, the Fed is expected to back the first interest rate hike in March 2022. The Fed needs to signal confidence and restore its own credibility on inflation, and this meeting is the right chance to do so.