- The target federal funds rate range has remained 0.00% - 0.25% since April 2020
- U.S. GDP expanded at an annualized rate of 6.9% in Q4 of 2021
- U.S. home prices rose at an annual rate of 18.8% in November
Top Three Market Headlines
Federal Reserve Signals an Upcoming Interest Rate Hike: Following its first meeting of 2022 last week, the Federal Reserve confirmed it could soon begin raising its target range for the federal funds rate. Most analysts predict the "liftoff" in the fed-funds rate—which has remained close to zero since April of 2020—will occur as soon as March, which is when the Fed also plans to cease its bond-buying stimulus program (a.k.a. "quantitative easing"). The Fed's pivot from its aggressive pandemic-induced monetary policy measures comes amid inflation readings reaching their highest level in nearly 40 years.
U.S. GDP Rebounds in Q4: The Commerce Department last week released its first estimate for Q4 2021 U.S. gross domestic product (GDP), a measure of all goods and services produced. According to the report, Q4 GDP expanded at an annualized pace of 6.9%, which exceeded analysts' expectations and represented a jump from the third quarter's 2.3% pace. The growth in Q4 was driven by an increase in private inventory investment, strong consumer activity, exports, and business spending as measured by nonresidential fixed investment; however, lower government spending at the federal level detracted from total output. For the full year, the U.S. saw a 5.7% increase in annualized GDP as the country continued to recover from the unprecedented drop in activity during the early days of the pandemic.
Home Price Growth Cools but Remains Strong: U.S. home prices continued increasing rapidly in November, though at a slightly lesser pace than seen earlier in the year. The S&P CoreLogic Case-Shiller 20-City Composite Home Price Index rose 18.8% compared to the prior year in November, the 12th straight month of double-digit increases. While this pace represented a slight deceleration from the prior month's annual rate of 18.5%, it was nonetheless the sixth-highest reading in the index's 34 years of data. Prices rose in November in all 20 cities measured, and stood at record highs in 19 of them. The strongest gains were seen in the South and Southeast, both up 25.0% year-over-year.