The Federal Reserve is expected to reveal the extent of its initial talks on cutting its $ 120 billion asset purchase program as the US central bank prepares to slow the massive monetary support pumped into the larger economy of the world during the pandemic.
Minutes of the Federal Open Market Committee last month Meet due at 2 p.m. on Wednesdays are expected to show that Fed policymakers have started to wonder when and how to start cutting back on purchases of U.S. Treasury bonds and mortgage-backed securities, which have been associated with rocketing interest rates at all times. throughout the coronavirus crisis.
Some Fed officials have pushed for a quicker start to the tapering process, expecting the labor market to pick up more quickly and inflation to rise more worryingly.
But other major US central bankers have urged caution in reducing bond purchases. They believe that the rise in inflation will be transient, that the economy is far from full employment, and that the pandemic is still a risk. As a result, markets may balk at an aggressive withdrawal of monetary support.
At the last FOMC meeting, the Fed kept its key rate near zero, but raised its rate. economic perspective to post stronger growth than initially expected this year.
Fed officials also predicted they would tighten policy with two interest rate hikes in 2023, earlier than expected just three months ago. But Fed officials have warned that this forecast will depend on the flow of economic data, and that policy guidance will only come from the FOMC statement.
Some investors have interpreted the new interest rate projections as an indication that the Fed may turn out to be more responsive to inflationary pressures than expected, causing U.S. government bond prices to rise sharply, which has since pushed yields lower. of the 10-year benchmark bond at 1.3 percent. This is the lowest level in four months.
The ultra-long 30-year bond is now trading at around 1.9%, well below its level of 2.3% seen in early June.