Fed policymakers have recently pivoted toward a more hawkish stance as inflation indices continue to run hot and the labor market appears relatively tight, given their dual mandate of promoting maximum employment and stable prices. Although labor force participation remains lower than it was prior to the pandemic, there are signals the economy may be near full employment within the context of the current health situation. The unemployment rate declined from 6.7% to 3.9% in 2021, a high percentage of workers are voluntarily quitting jobs, the level of job openings relative to those looking for work remains high, and wage growth has been strong. Meanwhile, inflation continues to run well above the Fed’s long-run 2.0% target. The Consumer Price Index excluding food and energy was up 5.5% in December. The Core PCE index, the Fed’s preferred inflation measure, was up 4.7% year-over-year in the latest report. Given the current inflation and employment dynamics, Fed policymakers have begun discussing plans to remove monetary policy accommodation. The Fed is currently tapering its asset purchases and we expect that process will be complete within the next few months. Should aggregate demand remain strong and economic activity remain robust, we believe the first rate hike may be announced in the first half of this year after the taper is complete. However, we do not believe monetary policy is on a pre-set course. We expect the Fed to adjust policy at a gradual pace and believe policymakers will adjust their views as necessary based on incoming economic and financial market data.