Facilitated by Dr. Ed Seifried

As 2021 draws to a close, it is clear that the current elevated inflation rate will be the major economic issue facing the economy in 2021.  Plus, just as the Delta variant seems to have subsided, a new variant of Covid-19 has recently emerged.  This so-called Omicron Variant looms as a major threat to the US economy in 2022.  Fed Chairman Jerome Powell, recently proclaimed, “The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation.”

While Omicron might be a major story in 2022, it’s inflation that will gain the bulk of the Fed’s attention in 2022.  Chairman Powell has argued for most of 2021 that high inflation is an aberration, mostly caused by virus-induced supply chain issues.  He called current inflation “transitory”.  But after inflation broke the 6% barrier, he changed his tune.  When pressed by US senators at his quarterly congressional testimony to explain why he holds that inflation is transitory, he responded, “It’s probably a good time to retire that word and explain more clearly what we mean.”

The problem of high inflation has caused the Fed to pivot away from reducing unemployment to getting a better grip on inflation.  The bond buying taper that The Fed imposed at its November FOMC meeting now seems too little, too late.  Chairman Powell admitted as much during his November 30, 2021, Senate testimony when he said, “ The economy is very strong and inflationary pressures are high, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases…perhaps a few months sooner.”

Dr Ed will report on just what all this means for community banking.  He’ll attempt to forecast what an accelerated bond-buying taper might mean to community bankers.  He will report on the economy’s growth in the 4th quarter of 2021 and review the various forecast for the most likely growth of the economy in the 1st quarter of 2022.  He will keep us informed on what policies the FOMC has in store for the economy going forward.