NEW YORK - The U.S. Federal Reserve is widely expected to keep rates unchanged when it ends its two-day meeting on Wednesday, but policy makers could show more concern about stubborn inflation and present more hawkish signals about the timing and extent of any easing this year.
The Fed pivoted to a more dovish outlook in December on growing confidence that inflation was on track to its 2% annual target. "The Fed doesn't want to break anything," said Padhraic Garvey, regional head of research, Americas at ING, adding that when inflation gets closer to 2% the Fed will likely "use that opportunity as one to get rates off the highs.""The main focus is which way they lean," said Stephen Gola, head of U.S. Treasuries Sales & Trading at StoneX Group.
Powell in November cited financial conditions when higher Treasury bond yields, mortgage rates and other financing costs were having a tightening impact on the economy. His comments were interpreted as potentially leading the Fed to hike rates less than expected.The Fed may also signal that it is getting closer to tapering its quantitative tightening program, in which it allows bonds to roll off its balance sheet without replacement.
"Longer maturities have a bigger effect on the market," said Eagan. By reducing duration but still buying Treasuries, they can potentially decrease the market impact "without upsetting the plumbing of the liquidity within the banking system," he said.I’m a Financial Advisor: 4 Moves I’ll Make If I Think Trump Will Win the Election
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Source: Entertainment Trends (entertainmenttrends.net)