October 25, 2021

The Fed is expected to be cautious as the economy sends mixed signals.

As the United States progresses from the epidemic, the Federal Reserve expects to consider next week whether the economy is healthy enough to begin withdrawing stimulus measures aided by recovery.

But the two-day meeting of the Federal Open Market Committee (FOMC), which formulates the central bank’s policy, starting Tuesday, could ultimately be a turning point, as have many others in recent months.

Analysts do not expect the Fed to immediately begin a slowdown in its massive bond purchases, and while the committee will release the latest economic forecasts, slightly larger than previous estimates released three months ago. Changes are expected.

Joe Berswell, chief economist at RSMUS, said the FOMC likes to prepare markets for any major change.

When he addresses the press after the meeting, Fed Chair Jerome Powell “chooses the opportunity to signal that tapping is coming, which will be announced in November with the start of December.”

The Fed took several emergency measures, starting in March 2020, with the fast-paced epidemic destroying the world’s largest economy.

In addition to lowering the benchmark lending rate to zero, the Fed began buying a large number of bonds and other securities to ease lending conditions and ensure that the financial system does not seize.

Powell said the bank could begin recalling the purchases by the end of the year, but experts expect them to take their time.

Roberto Perley, co-founder and head of Global Policy Research at Cornstone Macro, said: “I think the topping train left the station before the last meeting, which also expects the bank to Will start to slow down your purchase.

The FOMC will call as the economy sends mixed signals about the central bank’s two top priorities: jobs and prices.

The United States added 235,000 new jobs last month, although there were better job gains in recent months as Americans returned to lost positions or found new jobs due to the closure of the Cove 19.

Federal Reserve
The Federal Reserve is being closely watched, but it may not make major changes to its next policy meeting. Photo: AFP / Daniel Salem

“The Fed is never affected by just one report, they look at the trend and the trend is still very good,” Pearlli said.

“I think they will read the data and say we are still on a very safe path. I don’t think the data changes anything in their minds.”

Stable economies have pushed up inflation sharply this year, but in August, the consumer price index rose more slowly than in previous months.

Analysts will take a closer look at the Fed’s updated economic projections, especially in light of rising inflation and the delta version of Cove 19, which has increased uncertainty across the economy and hindered recruitment and business operations. Damaged.

“I expect most states to make a statement that will have a slight upgrade in the forecast for slower growth and a better upgrade in terms of better employment,” Brussels predicted.

The most critical aspect of the meeting will be the reduction in the Fed’s monthly asset purchases, which currently have at least 80 80 billion in treasury securities and 40 40 billion in agency mortgage-backed securities.

However, should the economy take a turn for the worse?

“In many ways, the evolution of data is working in favor of pigeons,” he added, “who prefer low-rate and easy-money policies.”

The Fed has said it will eventually cut debt to zero, although it is unclear whether central bankers will consider significantly improving jobs after losing more than 20 million jobs due to epidemics.

“If they are looking for 3.5 (unemployment), they will start raising rates again in 230 years,” said economist Joel Naroff.

“If they are looking for 4.5 (unemployment) and are still declining, I think the end of next year is appropriate.”

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