Stock Market Gains Over Optimism on Milder Omicron Variant

( Last week, Fox Business reported that US stock futures were up last Tuesday as investors were showing optimism that the latest COVID variant Omicron may be a much milder form of the virus. But how much Omicron has to do with it is unclear.

Last week’s inflation numbers could have just as much of an impact on the stock market as optimism over the Omicron virus.

It was reported this week that the spike in consumer prices that drove inflation to a four-decade high of 6.8 percent in November has prompted the Federal Reserve to consider interest rate hikes earlier than previously anticipated.

The Federal Reserve has kept short-term rates near zero since the pandemic response triggered a recession in March 2020. But at their two-day meeting that begins this week, Fed officials are expected to speed up the phase-out of their bond-buying stimulus which would set the stage for rate increases as soon as March 2022.

The Fed has been buying Treasury bonds and mortgage-backed securities to hold down long-term interest rates. In early November, the central bank announced it would cut its $120 billion monthly purchases by $15 billion a month, putting an end to the practice entirely by June 2022. Now economists believe the Fed will double the reduction rate from $15 billion a month to $30 billion so the practice ends in March instead of June.

Ending the bond purchases sooner would allow the Fed more flexibility to raise interest rates by early spring if inflation shows no signs of easing. Previously, economists forecast that the Fed’s first interest rate increase wouldn’t happen until June 2022 at the earliest.

As recently as September, Fed Chair Jerome Powell and other Fed officials maintained that the current surge in inflation was “transitory.” But in recent Senate testimony, Powell said that it was time to “retire” the word “transitory.”

Interest rate hikes would mean that Americans will pay more for mortgages, car loans, credit card bills, and student loans. But savings accounts and CD rates would also rise, benefiting seniors and those with savings.