The Federal Reserve's monetary policy is currently in media focus, as the Fed is expected to taper QE and raise interest rates for the first time since the end of 2018. However, the timeline of monetary tightening remains unclear - not all members of the Fed board support an earlier winding down of the bond-buying program. Currently, the US regulator may stick to the original plan and reduce its asset purchase program by $15 billion per month over the course of 8 months. The Fed in this course of action would pump cash into the economy at a reduced rate, pushing US stock indexes up for the next 5-6 months. In the final stages of QE tapering, investors could dump certain stocks or realign parts of their portfolio towards other assets. This could lead to a strong retracement or even a bursting of the stock market bubble, as forecasted by many experts over the past year.
According to the outlook by Goldman Sachs, the Fed would likely follow their original plan and hike interest rates in July 2022. Inflation could begin to decline next year, reaching 2%. Furthermore, in late 2022 - early 2023 the US could even face deflationary pressure. The investment company considers the US economic decline in the third quarter to be only temporary. The American economy could resume growing after the new wave of the COVID-19 pandemic subsides. However, the end of Fed monetary stimulus could put pressure on the US GDP. The actual economic situation in 2022 remains unclear, as many factors may influence it: the interest rate hike, the COVID-19 situation, the enormous US sovereign debt and others.
