Stock Market Decline is Unlikely to Distract the Fed from Policy Tightening

US stock futures
US stock futures

The present slide in the stock market is spooking some investors, but it is unlikely to threaten central bank officials enough to distract them from their present policy track.

Wall Street is anticipating that Fed might even take a tougher call this week as it is locked in a tough fight against increasing inflation amidst market turmoil.

Bank of America and Goldman Sachs both have said recently that they are seeing more possibilities of interest rate hikes and some other measures by the central bank that would change the easiest monetary policy by the fed reserve in U.S. history.

Peter Boockvar, Chief Investment Officer at the Bleakley Advisory Group said, “The S&P is down 10%. That’s not enough for the Fed to go with a weak backbone. They have to show some credibility on inflation here.”

Over the last two months the central bank has taken a sharp stance on inflation, as inflation is almost 40-year high.

With intense and durable inflation than central bank forecasts, policymakers have announced that they will start tightening monetary policy by increasing interest rates in March.

Boockvar said, “The difference this time is they have rates at zero and inflation is at 7%. So they have no choice but to react. Right now, they are not going to roll over for markets just yet.”

The Federal Open Market Committee (FOMC) meets Tuesday and Wednesday. FOMC sets interest rates.