Forecasts for the economy and interest rates are highly uncertain given the events last week.

Uncertainty has increased by the events of last week. Chairman Powell pivoted from the former Fed view of current conditions under which they have been conducting monetary policy in the past two years. He has eliminated the use of the term “transitory” in describing inflation fundamentals. He now admits that inflation is not all a function of supply chain disruptions and recovery from the pandemic induced shut down of sectors of the economy. There are systemic pressures on pricing that will last longer than the Fed had thought. As a result, the Fed may increase the size of the monthly taper of bond purchases from the $15 billion first announced.