Interest rates are front and center today as the Federal Reserve prepares to update the world on its current thinking about monetary policy. The main question: Will the central bank offer new clues on laying the groundwork for interest-rate hikes to combat the recent surge in inflation?

With a tsunami of attention focused on today’s FOMC meeting, let’s take a fresh look at what markets are offering in terms of yield by way of ETF proxies for the major asset classes. As a preview, not much has changed since our last update in late-October. There are still opportunities to earn modestly higher yields relative to safe-haven US Treasuries, but the spread remains relatively steady. Meanwhile, all the usual risks still apply when moving beyond government securities into risk assets in search of richer payouts.

Let’s start with the big picture. The average 12-month yield for the major asset classes: 2.82%, as of Dec. 14 via data compiled from Morningstar.com. That’s up fractionally from late-October. It’s also a full percentage point above the longest-maturity Treasury – the 30-year bond currently yields 1.82%.

Leading the ETFs in the table above for yield: 5.29% for the trailing one-year period via VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (EMLC). That compares with the lowest yield on our ETF list: a thin 0.94% for government bonds in developed markets ex-US (BWX).

Keep in mind that the yields in the rear view mirror may or may not be representative of payouts going forward, although the numbers offer a first approximation for managing expectations.

Speaking of managing expectations, analysts expect today’s Federal Reserve announcement and press conference will drop new clues that the central bank is moving closer to rate hikes in the first half of 2022. The current Fed funds policy rate target is 0%-to-0.25%. Fed funds futures are pricing in a 92% probability that today’s meeting will leave rates unchanged, based on CME data. But market sentiment is increasingly pricing in rising odds for higher rates in the new year.

“I think getting out of the easing [monetary policy] business is very much overdue,” says Rick Rieder, chief investment officer of global fixed income at BlackRock.

If so, the challenge will be one of pursuing tighter policy without killing the golden goose of economic growth, which may be facing stronger headwinds this winter as the omicron variant of Covid-19 spreads.

“Omicron is spreading at a rate we have not seen with any previous variant,” warns World Health Organization Director-General Tedros Adhanom Ghebreyesus. “Seventy-seven countries have now reported cases of omicron. And the reality is that omicron is probably in most countries, even if it hasn’t been detected yet.”

That leaves the central bank in a tight spot. “The Fed knows what to do, but they don’t necessarily know how to do it without squashing the economy,” says Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management.

Over to you, Jay Powell.