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It’s Fed day, virus uncertainty continues, and more China problems. Decision time The Federal Open Market Committee is expected to announce [View in browser]( [Bloomberg]( It’s Fed day, virus uncertainty continues, and more China problems. Decision time The Federal Open Market Committee is expected to announce it will accelerate withdrawal of monetary stimulus, tapering[ asset purchases]( to $30 billion a month to wind the program down by March of next year. Today’s decision will be accompanied by updated policy-maker forecasts which more than half of economists surveyed by Bloomberg say will show[two rate hikes in 2022](. The hawkish pivot from the Fed comes as the U.S. economy faces the [fastest inflation since the 1980s and a tight labor market](. The decision, at 2:00 p.m. Eastern Time will be followed 30 minutes later by a press conference with Chair Jerome Powell. Investors will be keeping an eye out for any comments on what the Fed intends to do with [its mammoth balance sheet](. Virus Markets [having to deal]( with the Fed reducing stimulus are also trying to factor in what the latest turns in the pandemic will mean. The omicron variant is now seen becoming the [dominant strain in Europe]( by mid-January as scientist try to figure out if it will lead to the suppression of the seemingly-more-deadly [delta strain](. In the U.S. the biggest factor for hospitalizations continues to be whether someone is vaccinated, with some healthcare systems [pushed to the brink](. New York Governor Kathy Hochul said that hospitalizations across the state have surged by 70% since Thanksgiving. Omicron now [makes up 3% of sequenced cases in the U.S.](, up from less than 0.1% earlier this month. Stimulus China’s economy is slowing more signs of slowing with retail sales growth weakening to 3.9% in November while the property market remained under pressure. Economists are warning that [recently announced measures]( to shore-up growth [may not be enough]( to stabilize the world’s second largest economy. Fears about the health of the country’s developers took another turn for the worse with Shimao Group Holdings Ltd., long considered one of the industry’ healthiest players, saw its [bonds tumble in trading](. The worry is that a payment failure by Shimao could cause a much broader reassessment of risk in the Chinese property sector. Markets slip Markets are fairly quiet this morning as investors await the Fed decision. Overnight the MSCI Asia Pacific Index slipped 0.2% while Japan’s Topix index closed 0.5% higher. In Europe the Stoxx 600 Index was up 0.3% at 5:50 a.m. Eastern Time, with tech companies leading the gain after yesterday’s slump. S&P 500 futures [were little changed](, the 10-year Treasury yield was at 1.443%, oil dropped to trade [below $70 a barrel]( and [gold slipped](. Coming up... U.S. November retail sales are expected to have grown 0.8% in the month with the data released at 8:30 a.m. November import prices and December Empire Manufacturing data are also at that time. Crude inventories numbers are at 10:30 a.m. The Fed decision is at 2:00 p.m., with Powell’s press conference at 2:30 p.m. TIC flow data for October is at 4:00 p.m. Nordson Corp., Lennar Corp. and Trip.com Group Ltd. are among the companies reporting results. What we've been reading Here's what caught our eye over the last 24 hours. - Putin, Xi [stand together]( as U.S. and EU worry about Ukraine. - The pro-immigrant case [against non-citizen voting](. - The Black Forest holds a secret to making [electric cars greener](. - House approves bill targeting China over [Uyghur forced labor](. - Crypto prices [go haywire]( on Coinbase, CoinMarketCap.com - Billionaire Stephen Ross sees [Florida gold rush]( as firms shift south. - Why it’s taking so long for China’s rover to reach the “[mystery hut](” on the moon. And finally, here’s what Joe’s interested in this morning Hello and Happy Fed Day. With inflation running well above the Fed's target, and the unemployment rate continuing to drop, everyone is expecting some kind of further hawkish pivot today. Speaking of inflation, I've been thinking back to a statement made by Jason Furman, Obama's former CEA chief, [on Odd Lots last month](. He noted that economists "tend to be less bothered" by inflation than regular people. At first this seems counterintuitive. After all, economists seem to be talking about inflation all the time. But on the other hand, given the impact of food and gasoline prices, and other highly salient items, on economic sentiment, it's clear that inflation weighs heavily in the minds of the general public. The one area aspect of inflation that economists do tend to worry quite a lot about is inflation expectations. The fear is not so much that gasoline prices or car prices or meat prices will run hot for a couple years. Their fear is that the public psychology around inflation will change. That we'll see panic buying. That we'll see a price spiral, and that this will have destablizing effects on general welfare (however you want to measure that). In this view, Volcker's triumph wasn't that he defeated inflation per se, but that he defeated an inflationary mindset. And so economists are mostly concerned with securing and consolidating that victory. What's notable right now, however, is that despite undesirably hot inflation, that's running way over the Fed's goals, we're not really seeing any change to the overall regime. There's no evidence of the dreaded inflationary mindset taking hold, either in markets, human behavior, or surveys. For example, when it comes to surveys of where the public sees inflation going forward, there's definitely been a ramp up. But per the NY Fed, the three-year outlook is already a lot milder than the one-year outlook, and it may already be going on. It's a similar situation with the UMich Survey of where people expect prices to go. Over the longer term, there has been a rise, but it's squarely within a normal level over the last decade and back. Meanwhile, in financial markets 5yr5yr forward breakevens, which show how inflation is being priced over the longer term have come down significantly since this October. However more importantly, they never got that high to begin with, and throughout the whole year of non-stop inflation talk, have generally remained in the range of the last several year. Back in the real world, there's no evidence of people hoarding or snapping up consumer items on expectations of higher prices down the road. (The closest to this might have been some pull forward of holiday buying due to anxiety about empty shelves for logistics reasons). But that's different than a longer-term inflationary spiral. One of the main reason that we see economists urge the Fed to go faster on hiking is not that hikes will do anything about prices right now, but that hikes will keep the inflationary psychology in check. However at least for the time being, there's no evidence of inflationary psychology being unchecked. At most we seem to be seeing a rise in Inflation Expectations Expectations as opposed to Inflation Expectations themselves. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Follow Us Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. 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