The FOMC meets this week with more specific guidance expected for monetary policy.

Financial markets are in a quandary. On one hand, the economy is still expanding at a healthy pace despite the surge in the virus and the labor market is very close to full employment. At the same time, inflation remains well above the level the Fed deems healthy. The FOMC meets this week with investors expecting the Fed to be more specific about future monetary policy changes. The consensus forecast calls for the Fed to announce the first increase in the Funds rate in March and continued rate increases will follow the remainder of 2022. The markets are now pricing in a minimum of three rate increases and possibly four in 2022. These moves are expected to be 25 basis points at a time but there is growing expectations the Fed will move 50 basis points with one of the first two moves. The Fed has moved from a position of promoting full employment and accepting higher inflation.