Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
Reporting on key macro data at the time of release.
- Emerging MarketsEmerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
Real-time insight of oil & gas markets
- MNI ResearchMNI Research
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
- About Us
Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.Free Access
Investors will watch Fed Chair Jerome Powell's press conference Wednesday for evolving assessments on inflation and labor market progress, as officials continue to hash out how and when to wind down asset purchases.
Since they last met in June, officials likely pushed up their inflation forecasts further after CPI surprised to the upside last month, rising 5.4% from a year earlier. But views differ over how transitory supply-side disruptions will prove.
No announcement on tapering is expected at this week's meeting, and there will be no update of officials' economic projections and the rate hike timeline
The core of the FOMC maintains that the recent jump in prices is tied to the reopening of the economy and that inflation will return to 2% next year, urging patience on tightening. The proliferation of the Delta variant of Covid-19 in recent weeks, adding to downside risks for growth, reinforces their case.
Some more hawkish officials however see a risk of the current spike in prices lasting through next year. They call for a rate hike next year and an earlier start to tapering.
Policymakers have promised to maintain USD120 billion of monthly Treasury and mortgage bond purchases "until substantial further progress has been made toward the Committee's maximum employment and price stability goals."
Many view the economy as having met the guidance threshold on prices but disagree on labor market progress and how difficult it will be to get people back to work. Some see substantial slack stemming from the roughly seven million jobs still missing from the economy while others believe the labor market is already tight and set to stay that way.
Powell in testimony to lawmakers earlier this month warned of risks in overreacting to temporary inflation when the "true" unemployment rate is "substantially above" the official rate of 5.9%.
However, to the extent that a high rate of price increases persists, threatening the stability of inflation expectations at 2%, Powell pledged to act. The FOMC stands ready to adjust policy if it "saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal," he said.
FOMC members also judged in their June meeting that "as a matter of prudent planning, it was important to be well positioned to reduce the pace of asset purchases, if appropriate, in response to unexpected economic developments, including faster-than-anticipated progress toward the Committee's goals or the emergence of risks that could impede the attainment of the Committee's goals."
The timing and form of the taper have yet to be decided and communicated. Former Fed officials told MNI the Fed is probably looking at winding down its bond purchase program over 12 months, but could take a flexible approach as conditions change, with some officials lobbying for a faster reduction of mortgage bonds and some for a more rapid taper overall.
Powell told lawmakers this month that low interest rates and purchases of Treasuries and mortgage-backed securities were all contributing to the strength of the housing market, with MBS "contributing probably a little more than Treasury securities, but ultimately, it's roughly the same order of magnitude."
Sign up now for free access to this content.
Please enter your details below and select your areas of interest.
Why Subscribe to
MNI is the leading providerof news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.
Our credibilityfor delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.