Time To Taper Bonds Smoothly, Not Rate Hikes, Says Powell

Source: Bloomberg.

The Federal Reserve is largely expected to announce the reduction of asset purchases at the end of its policy meeting Wednesday. DXY down -0.06%, EUR USD up +0.03%

• The Federal Open Market Committee is highly likely to hold rates near zero after a two-day policy meeting and announce a $15 billion monthly reduction in bond purchases from the current $120 billion rate.
• The panel will issue a statement at 2 p.m. Washington time. No quarterly projections are published at this meeting and Powell will inform reporters 30 minutes afterward.
• While recognizing that elevated inflation has lasted longer than anticipated, Powell stated on Oct. 22 that his baseline forecast remains for price pressures to subside as the economy reopens.
• Fed officials have stated that rate increases would be up for discussion until the bond-buying program ends, even though investors expect more than two quarter-point increases by early 2023.
• The policy committee is likely to argue that it has met its threshold of “substantial further progress” on both inflation and employment to justify a reduction of bond buying.