[ad_1]
Market players, investors and traders await the conclusion of the September FOMC meeting tomorrow. They will focus carefully on the most recent policy statement from the Federal Reserve and the newly updated interest rate projections vis-à-vis the dot plot which will give projections through 2024.
The statement will provide insight into one of the biggest questions that could be answered, whether or not the Federal Reserve will clarify the current proposed timeline and the start date on which the Fed will begin to reduce its monthly asset purchases by $ 120 billion. Currently, the Federal Reserve purchases $ 80 billion in US debt and 40 billion MBS (mortgage backed securities) every month.
During the banking crisis and the recession that followed in 2009, the Federal Reserve accumulated a balance sheet of approximately $ 4.5 trillion. At the end of their “quantitative easing”. (QE1 to QE4), they began to liquidate assets and reduced their balance sheet to $ 3.75 trillion before feeling that further reduction would hurt the economic recovery. This new round of “quantitative easing” has inflated their balance sheets exponentially and, as of September 15, the Federal Reserve had amassed $ 8.4 trillion in assets.
Analysts are divided as to whether they think the Fed will announce the start of its reduction in asset purchases tomorrow. The majority of analysts currently believe that an announcement will come in November and that the reduction could start as early as December 2021. However, the devil is in the details in that an announcement of a reduction start date is only ‘something that market players want and need to gain in clarity. It is also interesting to know how quickly they will decrease and by how much they will reduce their monthly purchases.
Recent statements from senior Federal Reserve officials have clearly shown a division among voting members over when to begin the process of ending quantitative easing. Unanimous consensus will be difficult at best, however, if they do reach consensus and make an announcement tomorrow that is the start date that will result in bearish market sentiment for gold prices. Conversely, if no announcement is made in tomorrow’s Fed statement or in President Powell’s press conference which takes place about half an hour after the conclusion of the September FOMC meeting, it will be interpreted as a much more accommodating behavior and therefore will provide bullish tailwinds to push gold up.
Equally important is the publication of their updated interest rate forecasts. Not only will Powell make it clear when the Fed will start normalizing rates, but he will also indicate the level of division among Fed officials. Finally, it will be the first time that market participants have clarified the interest rate projections for 2024.
While market participants can gain clarity on the Federal Reserve’s intentions by removing some of the uncertainty that currently exists, this will amplify volatility in many financial markets as analysts glean the statement of changes from the previous FOMC statement looking for nuance and wording. of their current economic outlook.
For more information about our service, just use this link
Wishing you, as always, good transactions,
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a solicitation to effect an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.
[ad_2]
Source link