- The Federal Reserve will accelerate the taper of its $120 billion monthly asset purchases
- The Producer Price Index jumped 9.6% in November versus the prior year
- Industrial production rose 0.5% in November from the prior month
Top Three Market Headlines
Fed Confirms Pivot From Monetary Stimulus: At its final meeting of the year last week, the Federal Reserve confirmed it will accelerate the reduction of its bond-buying stimulus measures, now expecting to end the program by March of next year. In addition, bank officials pulled forward their projections for hiking the bank's benchmark interest rate, the federal funds rate, setting the stage for up to three rate hikes in 2022. The updated plans represent a "hawkish" pivot as the Fed seeks to battle lingering inflation, with Fed Chairman Jerome Powell stating there is a "real risk that inflation may be more persistent" and that the policy change will better position the Fed to deal with that risk.
Soaring Producer Price Index Underscores Inflation Trends: The Bureau of Labor Statistics reported last week that the Producer Price Index (PPI), which reflects the prices that suppliers charge businesses, rose at a record pace in November. The index rose 0.8% from the prior month, producing a year-over-year increase of 9.6%, the largest annual gain since the index's inception in 2010. At the same time, the "core" PPI, excluding energy and food, jumped 0.7% on the month and 7.7% versus the prior year. The largest price increases were seen in iron and scrap steel, which rose 10.7% from the prior month.
Industrial Production Expansion Continues: The Federal Reserve reported last week that industrial production, which measures the output of manufacturing, mining, and utility companies, rose 0.5% in November from the prior month and 5.3% over the prior year. This followed a strong monthly gain of 1.7% in October and pushed the index to its highest level since September 2019. Meanwhile, capacity utilization for the industrial sector rose 0.3 percentage points in November to 76.8%; while this measure remains 2.8 percentage points below its long-run average, it stands at the highest level since December 2019.