This week, we finally got straight talk from the ordinarily cryptic Federal Reserve Chief Jerome Powell. According to Powell, the U.S. central bank will definitely get more hawkish in the immediate term, by tapering (i.e., winding down) its asset purchases.

No “taper tantrum” ensued. On the contrary, Wall Street cheered and stocks soared. The stock market’s relief rally on Wednesday and Thursday wiped out the week’s earlier losses. It’s not often that you see traders applaud a more hawkish Fed, but the uncertainty over tapering has been removed.

There’s an old adage on Wall Street: bad certainty is better than uncertainty.

At the end of the Fed’s two-day policy-making meeting Wednesday, Jerome Powell signaled that the central bank intends to soon slow its program of asset purchases, known as quantitative easing (QE). The Fed has been conducting QE on a massive scale to increase the money supply, with the goal of shoring up the pandemic-battered economy. Powell also indicated that the Fed might hike interest rates in 2022. The news sent Treasury yields higher.

Powell and his cohorts suggested that the Fed could unveil a slowdown to its monthly purchases of government-backed securities as soon as November when the Fed holds its next meeting. The QE program may come to a complete end by the middle of next year. But the Fed is still moving judiciously because the economic recovery remains fragile.

Among the crosscurrents buffeting the global economy are COVID Delta and the China Evergrande Group (OTC: EGRNY) debt debacle. The huge China-based real estate conglomerate missed its latest interest payment Thursday, and as of Friday its creditors were in the dark as to what comes next. (The Sinophobes who warn that China is taking over the world tend to overlook that country’s staggering indebtedness.)

Read This Story: Will The Global Dominoes Fall?

Political gridlock in Washington, DC is another threat, with further fiscal stimulus hanging by a thread. I’ve been writing about politics for more than 40 years and I’ve never seen Democrats and Republicans hate each other with such white-hot intensity. The Watergate era was kumbaya compared to today.

President Biden’s $3.5 trillion spending plan, despite its widespread popularity with the public (and with Wall Street), is in real jeopardy. Centrists within the Democratic party are balking at the plan as well. But the fiscal stimulus would come in handy, because economic projections are getting revised downward by private and public economists.

Fed officials released new economic projections Wednesday through the end of 2024. The Fed reduced its forecast for U.S. gross domestic product growth in 2021 from the 7% projected in June to 5.9%, largely due to the ravages of COVID Delta in regional hot spots where vaccination rates are low (see chart).

The Fed also expects inflation to run at 4.2% for 2021, more than double the Fed’s 2% target rate but still far below the hyper rate that the inflation alarmists have been predicting. (Doom-and-gloom inflation forecasting has become a cottage industry, promulgated by hucksters.)

The upshot: Wall Street liked what it heard this week from Powell and his cohorts. The Fed’s strategy of psychologically preparing investors for the inevitable taper appears to be working.

On Thursday, the main U.S. indices extended their gains from Wednesday and performed as follows: Dow Jones Industrial Average +506.50 (+1.48%); the S&P 500 +53.34 (+1.21%); the tech-heavy NASDAQ +156.40 (+1.04%); and the small-cap Russell 2000 +40.48 (+1.82%).

After the opening bell Friday, U.S. stocks were trading mixed, as Evergrande’s debt problems brought back that old foe, uncertainty. Asian stocks were generally lower.

The dot plot thickens…

Fed data released Wednesday included the “dot plot,” a set of anonymous individual estimates showing where each of the Fed’s 18 policymakers expect interest rates to fall at the end of each year. Nine Fed policymakers noted one or more rate hikes for 2021, compared to seven the last time dot plot projections were released in June.

Of course, the financial markets and global economy may derail these scenarios. The news has a way of throwing the best laid plans into a cocked hat. But for now, the central bank’s dot plot offered something for both hawks and doves alike.

While the markets seem to have taken the timing of interest rate increases as almost a certainty, plenty of flexibility remains. That’s especially true since there’s still slack in the economy in terms of utilization and worker participation.

Jobs growth remains uneven. The U.S. Census Bureau reported Thursday that first-time jobless claims totaled 351,000 last week, an increase from 16,000 the week before and surpassing the 320,000 consensus estimate. Continuing claims increased by 181,000 to 2.84 million.

However, we seem to be at the point in the recovery cycle where discouraged workers are reentering the labor force. As autumn unfolds and schools reopen, I expect the unemployment rate to start trending downward at a faster pace.

The Fed’s latest balancing act is designed to maintain economic growth, without sparking runaway inflation. For now, the central bank’s game plan seems to be working.

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John Persinos is the editorial director of Investing Daily. Send your questions or comments to mailbag@investingdaily.com. To subscribe to John’s video channel, click here.