Fed meets for 1st time since Jerome Powell hinted at policy shift

For the first time since Federal Reserve Chairman Jerome Powell jump-started expectations for a faster taper, officials will meet on Tuesday and Wednesday.  Powell had said the central bank needed to shift its focus toward preventing higher inflation from becoming entrenched and away from fostering a rapid rebound in hiring from the pandemic.

 

The pivot raises the prospect that the Fed’s post-meeting statement — a document parsed by markets as a signal of likely future policy — could be overhauled at the conclusion of their meeting.

 

Investors are pricing in a quicker end to the Federal Reserve’s bond-buying scheme ahead of the central bank’s policy decision on Wednesday, positioning for multiple rate increases over the next few years. JP Morgan, Morgan Stanley, Citi, and NatWest Markets are all anticipating the Fed’s bond purchases to wrap up in March instead of June. The Fed began scaling back its quantitative easing programme last month.

 

Futures on the federal funds rate, which track short-term rate expectations, on Monday priced in a more than 90 per cent chance of a quarter-point tightening by the Fed by May next year.