FOMC and a Historical meeting! 

Will that be the beginning of tightening policies?

Market analyst – IFC Markets

Another focus of the week and especially today, which is expected to move the markets, is the FOMC monetary policy meeting. Any news and reports from expectations and when they are going to start tapering the bond-buying and when they may start raising interest rates will lead the market direction.

Before moving to FED and its policy, let’s check the latest meetings of central banks and see what they did and decided.

In Canada, BoC started tapering several months ago and it is already reached 1B Canadian dollars a week, which is down from its previously 4B Canadian dollars weekly. The same policy we saw in Australia and New Zealand. However all these three central banks in line with ECB, BoJ, and BoE, holder their policies and had no change in the volume of bond purchases and interest rates. The same thing that we saw earlier today in Japan and BoJ announcement. 

 

And now for today, many are waiting to see that central bank announce a plan to start reducing its massive bond purchases sometime in 2021, November, or December. On the other hand, economic data, entering the colder seasons, and potential risks of Covid-19 can create a bit more cautious atmosphere and hold the FOMC members for a bit longer time on the current policies. So in this case, the so-called “dot plot”, which charts policymakers’ economic and rates projections, can put more light on the timeline that when the Fed will decrease the on purchases and hike interest rates from the current near-zero level.

Also, we have to know that market is already priced on tapering, so what will move the markets, is how dot-plots or comments from Powell in his press conference after the announcement will affect the investors and market participants. 

In short, while holding the current dovish policies will support the stock markets, however any dovish stance, may hurt the bulls in the short run, but it means that the economy is going well, so in the long run, it will be positive for stocks, and even if see a deeper price, it just means a better opportunity to buy in deep! 


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