The Fed surprise

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Hello. Today we look at the Federal Reserve's latest decision, student debt in the U.S. and why Japan's stimulus may not be as big as it looks. A Hawkish Fed? The Federal Reserve surprised markets by taking a bigger step towards the moment it will start withdrawing its monetary stimulus. Spurred on by outsized gains in inflation and steady improvement in the labor market, Chair Jerome Powell and colleagues: Projected two interest rate hikes in 2023, sooner than they previously forecast and more aggressive a shift than anticipated Upgraded inflation estimates for each of the next three years Began talking about how to taper their massive bond purchases "You can think of this meeting that we had as the talking about talking about meeting if you like. And I now suggest that we retire that term," Powell said. He emphasized that "we're a ways away from substantial further progress" toward meeting Fed goals – notably on employment – though "we're making progress," he said. Read our analysis, here. Financial markets took note, with the dollar climbing the most in a year, Treasury yields advancing, and the S&P 500 Index retreating further from Monday's record high. One conclusion is that a majority of officials don't want to run a lengthy test with rising prices, even though a new policy strategy they adopted in August calls for more tolerance. The risk is that three years of above-target inflation starts to seep into public perceptions and move expectations higher. Wednesday's meeting was largely about signaling that they aren't going to let that happen. Still, Powell may need to soon return to squaring the strategy with the new sentiment and by the time of the Jackson Hole conference in late August will be under pressure to give more insights into the tapering. —Chris Anstey Got tips or feedback? Email us at ecodaily@bloomberg.net Check out the latest Stephanomics podcast to hear World Bank Chief Economist Carmen Reinhart explain why she worries the recent surge in inflation could be around for awhile, hitting the world's poorest hardest. The Economic Scene It's hard enough to pay off college loans out of a salary. It doesn't get any easier when you retire. The fastest-growing chunk of the U.S.'s $1.7 trillion student-loan pile is the one held by the oldest borrowers. There are now about 8.7 million Americans aged over 50 who are still paying off college loans, and their debt has increased by about half since 2017.  Today's Must Reads The ECB retreat | European Central Bank officials head off this weekend together to discuss the biggest overhaul of their monetary policy strategy in almost two decades. Meantime, Chief Economist Philip Lane signaled to Bloomberg that policy makers may not have all the data they need by September to start shifting policy Tax revolution timetable | The world's richest nations have their work cut out to achieve the overhaul of corporate taxation they're keen on. Central banks | Indonesia, Switzerland and Taiwan all left interest rates on hold. But Brazil raised its benchmark for a third time, Norway signaled a hike in September. Looking up | Fewer Americans fear eviction or foreclosure as the moratoriums end. Many families' finances are improving in time to stay in their homes. Bitcoin beach | An anonymous donor turned a tiny Pacific coast surf town in El Salvador without a bank into the world's biggest Bitcoin experiment. Up next: the entire country. Need-to-Know Research The Japanese government's stimulus packages may be smaller than first seems, according to an analysis by the Peterson Institute for International Economics. The headline numbers include components funded by the private sector and measures which don't directly impact the economy, said Egor Gornostay and Madi Sarsenbayev. Read the full research here On #EconTwitter The inflation debate continues. Read more reactions on Twitter  Save the Date Watch the future unfold. Wednesday, June 30 for Bloomberg New Economy Catalyst, a global 6-hour virtual event celebrating the innovators, visionaries, scientists, policymakers, and entrepreneurs accelerating solutions to today's greatest problems. The conversations will explore what matters, what's next, and the what-ifs in climate, agriculture, biotech, digital money, e-commerce, and space — all through the imaginations and stories of these ascendant leaders. Register here. Enjoy reading the New Economy Daily? Click here for more economic stories Tune into the Stephanomics podcast Subscribe here for our daily Supply Lines newsletter, here for our weekly Beyond Brexit newsletter Follow us @economics The fourth annual Bloomberg New Economy Forum will convene the world's most influential leaders in Singapore on Nov. 16-19 to mobilize behind the effort to build a sustainable and inclusive global economy. Learn more here.

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