Understanding the outcome of the December FOMC meeting and its market implications.

The flattening of the US yield curve will depend on the persistence of core inflation and on the impact of monetary tightening on growth.

The Fed is determined to hike rates rapidly. In the short-term the US economy will be supported by the many cushions present in the economy, as a result of all the fiscal and monetary support provided during the Covid crisis. The Fed will be in a more difficult situation in 2023.

The three major central banks issued restrictive signals last week. The banks have succeeded in changing the course of their monetary policies without harming the markets.

US consumer prices jumped by 6.2% in October, their highest level in 30 years! Deteriorating inflation data have pushed markets towards forecasting a faster pace of tapering and a more rapid removal of accommodation in 2022.

Eurozone and US sovereign bond markets have partially reversed the decline recorded over the summer.

Central banks have put in place ultra-accommodative monetary policiesto support economies during the Covid crisis.