The number one topic in 2021 was inflation and the recovery of the global economy. A significant decline in the unemployment rate, the dominant growth of the real estate and energy sector, the high level of price growth and the impact of the higher inflation rates on financial markets are all analyzed in our report.
Q4 2021 Highlights:
- US price growth experienced unprecedented momentum in the fourth quarter. The year-over-year CPI reached +7.0% in December, while prices increased by +6.8%, and +6.2% year-over-year in November and October. Core consumer inflation increased by +5.05% year-over-year in December, which is the highest year-over-year change in core inflation since 1991 (compared to December 2020 vs. 2019 – +1,61 %). Overall consumer price growth increased by +7.04% year-over-year in December, while prices increased by +0.5% on a month-on-month basis.
- During 4Q 2021, the FOMC decided to slow down monthly bond purchases (QE) by 50% – from the original $120 billion to $60 billion. The significant slowdown in QE indicates an impending rise in interest rates and increased market volatility. By aggregating all available information, the bond market is gradually overestimating the increase in interest rates by increasing bond yields.
- The normalisation of the Fed’s monetary policy began in the fourth quarter of 2021 with a slowdown in the QE programme. An expected interest rate hike, or a reduction in the FED’s balance sheet, may lead to a turbulent period in 2022.
