Two "dark lines" for the fed to raise interest rates
The Fed has not actually "turned the eagle". At present, the Fed's joint "expectation management" with Biden means more. At present, the high inflation in the United States has begun to restrict the expectation of economic growth, but the weak employment market and the disturbance of the epidemic situation may not be appropriate for the fed to actually "turn the eagle". In this situation, it is more important to do a good job in the expectation management of inflation first.
Although Omicron is "threatening", we believe that this round of epidemic may be difficult to become a key variable hindering interest rate hike. According to the stress test of Omicron transmission conducted by the University of Austin, Texas, the current round of epidemic in the United States may not last long, and the peak probability appears at the end of January and early February 2022. Therefore, the current round of epidemic may not last long, which has a limited impact on the rhythm of the Fed's interest rate hike.
If the Fed's expected management has begun and Omicron's impact on interest rate hike is relatively limited, the interest rate hike in 2022 is already a "probability event". In addition to economic considerations, we believe that politically, we also tend to let the Fed raise interest rates early. The two "dark lines" affecting the Fed's early interest rate hike in 2022 are: 1) controlling inflation can alleviate the hidden danger of the Democratic Party's "mid-term election"; 2) US stock risks need to be released in advance.
Two major concerns of the U.S. economy in January 2022
1) Can the build back better act be effectively promoted by mid January 2022?
2) Interest Conference on January 25-26, 2022.
The risk suggests that the Fed's easing exceeded expectations and the spread of Omicron strain exceeded expectations.
