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By Anneken Tappe, CNN Business
The Federal Reserve is unlikely to take his foot off the accelerator pedal this week because the the recovery has come up against obstacles.
Notably: the Delta variant.
Just a few weeks ago, investors were convinced that the central bank would announce a the reduction of its massive recovery program in the event of a pandemic at its September meeting, which began on Tuesday. But some grim economic data, notably a very disappointing employment report and changes in consumer sentiment Following the increase in Covid-19 cases, have pushed back expectations regarding the taper schedule.
“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 hit a low. 13-year-old, 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. Yet it remains at a uncomfortably high level compared to the pre-pandemic time.
Temper tantrum ?
Until this week stock market liquidation, under the impetus of the Chinese real estate developer The Evergrande debt crisis and worries about the US debt ceiling, it’s hard to imagine the Fed would double down on 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.
The-CNN-Wire
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