Newton IM: Federal Reserve meeting, to taper or not to taper?
Newton IM: Federal Reserve meeting, to taper or not to taper?
This is a preview by Jon Day, Manager Fixed Income at Newton IM, part of BNY Mellon Investment Management, on tomorrow's Fed meeting.
“With headline inflation running ahead of the Fed’s target, they must decide whether it will fall back as bottlenecks dissipate or if there is more of a whiff of permanence about it and it’s time for the pace of bond buying to start falling.
It’s little over a year since the Fed formally changed its inflation target to AIT with the explicit message that they want inflation to run ‘hot’. Next week’s meeting is likely to be too soon for the Fed to commit to tapering, it is still very unclear where inflation will settle and there are still uncertainties on the US’s recovery path. There is still a significant way to go for the US economy to recover all the jobs it lost and there is still a risk of a spike in virus cases causing further restrictions.
The Fed’s messaging may become more urgent but they’ll be patient as to announcing a formal start to tapering, their next meeting in November seems a more sensible time to fire the starting gun.”