Inflation is high. The markets are volatile. Economic growth in the world’s two biggest economies is expected to slow. And the Winter Olympics begin.
After nearly two years of near-zero interest rates, the Federal Reserve signaled that it would probably raise them in March. Jerome H. Powell, the Fed chair, said officials no longer thought that America’s rapidly healing economy needed so much support, given that inflation is running far above policymakers’ target and the tight labor market. By making it more expensive to borrow money to buy a house or car, the Fed hopes the higher interest rates will cool demand and eventually help rein in inflation. The Fed’s preferred measure of inflation, the personal consumption expenditures index, was 5.8 percent in December, the fastest pace since 1982 and one that could be disastrous for the political prospects of President Biden and his fellow Democrats in the November midterm elections. Whether you held traditional stocks, cryptocurrencies or a combination of both, it was a stressful week to be an investor. Stocks swung wildly as uncertainty about upcoming interest rate increases — how many and how quickly — came at the same time as positive signs about growth in the American economy last year. Bitcoin, the largest cryptocurrency, continued its dramatic fall before inching up slightly, though its value remained just above where it was last summer. Bitcoin’s value is now about half of its peak in November.
