21.10.202107:03 Forex Analysis & Reviews: Economists believe that US inflation may remain high for much longer than Jerome Powell says

On Wednesday, all key US stock indices continued to rise. Notably, the overall background for the stock market remains quite favorable. Besides, it is mainly expressed by the Fed's actions and its plans for the near future. Despite numerous debates about monetary policy tightening, nothing changed. The economy continues to receive $120 billion a month, and the key rate is unlikely to be raised before the end of 2022. Consequently, the markets have another six months to a year to keep growing. Besides, bitcoin takes advantage of this fact as it also rises and hits its all-time highs. It is possible to assume that ETF launch exerts an influence on bitcoin. However, this reaction is too strong.The growth process is more likely proceeding. It began in March last year when the COVID-19 pandemic began. Central banks have started stimulating their economies by printing a large amount of money, which are certainly deposited in certain markets, provoking inflation and rising prices.

Meanwhile, Reuters news agency conducted a survey among economists and found that most of them do not expect a rate hike before 2023. Experts noted that the main problem for the economy now is high inflation. Market participants fear it may stay high longer than Jerome Powell and other Fed officials assure. Although many of them are pushing for an immediate tapering of the quantitative stimulus program, slowing down price growth. However, inflation has already accelerated to 5.4% y/y, which is considered a 13-year high. Now it will be difficult to stop. Initially, the Fed wants to reduce the QE program by $15 billion. I believe this measure will not stop inflation. Besides, prices will continue growing in almost all sectors of the economy, especially concerning a sharp rise in global energy costs in recent months.

Jim O'Sullivan, one of the polled economists said that they expected the Fed to be patient. He added that a federal fund rate hike was not forecasted before the end of 2023. Jim O'Sullivan noted that the exact timing would depend much on the US economic situation. Out of 67 economists polled by Reuters, 40 people said the Fed would raise the rate in the first quarter of 2023, the rest thought that it would happen in the second quarter of 2022. Economists also believe that inflation may remain high till the end of 2022. So, it is currently a key indicator. Besides, prospects for stock indices are largely determined by the Fed's actions in the near future. Notably, the next Fed meeting is scheduled for November 3.