Monetary policy

Why are markets so sanguine about the interest rate outlook? The answer lies in the Fed’s balance sheet, and in particular the level of excess reserves placed there by commercial banks.

Newly released transcripts of Federal Reserve policy meetings in 2016 show then-Governors Jerome Powell and Lael Brainard were quick to pivot away from planned interest-rate hikes in the face of risks posed by a stumbling Chinese economy.

Federal Reserve Bank of Cleveland President Loretta Mester said the central bank should shrink its balance sheet as fast as it can without disrupting financial markets and repeated her backing to a March interest-rate increase.

Coming off last week's $19.5 million influx of weekly new issues, supply this week is lower as the market watches the Federal Open Market Committee meeting.

ICI reported $1.43 billion of inflows into municipal bond mutual funds in the week ending Nov. 17, down from $1.61 billion in the previous week.

Former U.S. Treasury Secretary Lawrence Summers said Federal Reserve policy makers are signaling a “new era” in which they recognize the U.S. economy is overheating as inflation runs at its fastest in three decades.

Federal Reserve Bank of St. Louis President James Bullard said the central bank should speed up its reduction of monetary stimulus in response to a surge in U.S. inflation.

San Francisco Federal Reserve Bank President Mary Daly was considered by the Biden administration for a seat on the U.S. central bank’s board and she declined, according to two people familiar with the matter.

As the Federal Open Market Committee meets to discuss monetary policy, Gary Pzegeo, head of fixed income at CIBC Private Wealth will discuss his thoughts about what will come from the meeting.

Friday’s data suggested inflation remains a problem, as the voices calling for Federal Reserve action increase.