The Federal Reserve will not announce any cuts this week. here’s why

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“Given the uncertainty over the pandemic, fiscal policy and economic data, it seems unlikely that they will make a meaningful announcement,” said David Kelly, chief global strategist at JPMorgan Funds.

The next Fed policy update will be released Wednesday at 2 p.m. ET, followed by a press conference with President Jerome Powell at 2:30 p.m. ET.

Kelly expects the central bank to announce a November stimulus cancellation that would begin in December.

The Fed currently buys $ 120 billion in assets each month – $ 80 billion in Treasury securities and $ 40 billion in mortgage-backed securities.

The idea behind reducing buying was that the economy would not need this kind of stimulus as the recovery progressed on its own. The labor market improved at a rapid pace for most of the summer, and inflation has hit a 13-year high, signaling that there may be too much stimulus in the system.
The Fed kept saying high inflation would be temporary, but it also hinted that it may soon curtail its monthly buying spree. Recently, consumer price inflation has peaked. Still, it remains at an uncomfortably high level compared to pre-pandemic times.

Temper tantrum ?

Meanwhile, this week’s stock market sell-off, boosted by Chinese property developer Evergrande’s debt crisis and concerns about the US debt ceiling, makes it hard to imagine the Fed would double down on the bad news. for the market. There is no doubt that Powell will receive plenty of questions about his assessment of the two issues at Wednesday’s press conference.

The US stock market quickly recovered from the stock market crash at the start of the pandemic thanks to the sugar rush of government and Fed stimulus funds. But stocks would likely take a hit if the silver taps were turned off.

The wait brought back unpleasant memories of the “taper tantrum” of 2013 when financial markets and, in particular, bonds panicked over the Fed’s decision to pull out. Stimulating the 2008 Crisis. Analysts expect Powell to choose his words very carefully on Wednesday when reporting any changes in the market.

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