Analysts at Moody's have published their preview, warning that the Federal Reserve is facing a delicate balance:
- “If the market perceives that the Fed is behind the curve in controlling inflation, it would lead to higher inflation expectations and long-term interest rates, potentially weakening the dollar and affecting asset values,”
- While, on the other hand, if the Fed overreacts to inflation, “it could result in tightening monetary policy too much, in turn dampening economic growth”
As for what sort of signalling the market will be looking for:
- “If the Fed announces faster tapering to end the bond purchase program, possibly by March 2022, it would more strongly signal that monetary policy is turning”
- “a faster taper would give the Fed the flexibility to begin raising rates anytime in the second half of 2022.”
- “Even if the FOMC were to announce a quickening taper and an earlier end to bond purchases, the committee will likely stress data dependency with regards to the timing and pace of rate increases”
---
The FOMC begins their meeting today, Tuesday 14 December 2021 (US time) with the statement due at 1400 ET on Wednesday, 15 December 2021 .
- which is 1900 GMT
Federal Reserve Chair Powell will conduct his post-statement news conference from 1430 ET (1930 GMT).
