Steve Skancke

It is not clear whether FOMC members truly believe their higher inflation and interest rate forecasts, or if they are being overly hawkish to prevent further market exuberance.

Increasing attention to whether inflation is a problem for the U.S. economy and financial markets isn’t resolved easily by looking at the most recent economic and financial market data.

While no FOMC action on monetary policy is expected, markets are watching for how the Federal Reserve partners with the Biden administration and how it reacts to the 10-year Treasury yield rising from 0.52% on Aug. 4 to 1.15% on Jan. 14.

How “progressive” the new leadership decides to act will affect what roles the Fed will need to assume and support. Greater transparency and responsiveness to congressional leadership will be primary among them

With its new policy framework in place, the Fed will decide how it can use its tools more aggressively and effectively to achieve its primary goal of increasing jobs and wage growth through a more robust economic rebound.