U.S. Federal Reserve officials will meet this week for the first time since Democrats took control of the Senate earlier this month, which has raised the odds of new President Joe Biden and his congressional allies passing a big pandemic relief package.
At the conclusion of the central bank’s two-day policy meeting on Wednesday, Fed Chair Jerome Powell will give the public a sense of how he and his colleagues evaluate the impact of the fiscal shift on the economic outlook amid rising Treasury yields and a stock market pushing to new record highs.
With yields on 10-year Treasury notes above 1% for the first time since the pandemic struck, investors are increasingly speculating that more government spending to aid the economy will allow the Fed to begin tapering its massive bond-buying program as soon as the end of the year. That’s in spite of Powell’s recent insistence that “now is not the time to be talking about exit.”
The government’s first look at official data on fourth-quarter gross domestic product, set to be published Thursday, will show what policy makers are working with. After a record 33.4% annualized pace of growth in the third quarter, the economy likely downshifted significantly. Forecasters surveyed by Bloomberg project a 4.2% pace of expansion in the final three months of the year.
Consumer spending, which accounts for about two thirds of GDP, is seen to have slowed to just over 2% growth — after a third-quarter annualized surge of 41% — amid a lack of further government relief and resurgent coronavirus outbreaks toward the end of last year.
Elsewhere in the global economy, the International Monetary Fund will this week update its economic outlook, and a slew of policy makers speak at the World Economic Forum’s virtual Davos Agenda conference. Central bankers in Nigeria, Colombia and Kazakhstan also hold meetings.