The year 2022 brings a turning point for the US Federal Reserve and the global economy. Policymakers have signaled a shift in monetary policy from easing to tightening, with three rate hikes expected during the year. The change represents a growing confidence in the US economy, but such rate hikes have historically been followed by financial disruptions around the globe. Is there a potential crisis brewing in the markets for this year, and where do the risks lie?
Coronavirus pandemic shapes Fed policy
In the spring of 2020, with the COVID-19 pandemic bringing US economic activity to a standstill, the Federal Reserve stepped in to try and prop up the economy. The central bank eased monetary policy by slashing rates and ramping up asset purchases.
How do interest rates impact the economy?
The Federal Reserve influences the economy by hiking or cutting the Federal Funds Rate. This…