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What to expect from FED today at 21:00
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Loading...he Federal Reserve is widely expected to leave interest rates unchanged at its current range of 1.00% to 1.25% in its announcement at 2:00PM ET (18:00GMT) on Wednesday and also reveal its plans for the winding down, or tapering, of its asset purchases in order to begin, likely in October, the reduction of its $4.5 trillion balance sheet.
The tapering plan already laid out by the Fed was to shrink the balance sheet by only $10 billion a month divided into around $6 billion in Treasuries and $4 billion in agency debt and mortgage-backed securities (MBS) with the increase being made in similar amounts at three-month intervals until the reduction in repurchases reached a total of $50 billion, or $30 billion in Treasuries and $20 billion in MBS.
The Fed targets 2% inflation and its preferred indicator, the personal consumption expenditure deflator was just 1.4% in July, although the August consumer price index rose to 1.9%, from the prior month’s reading of 1.7%.
“Even though inflation is currently somewhat below our longer-run objective, I judge that it is still appropriate to continue to remove monetary policy accommodation gradually,” Dudley said
Fed fund futures have kept the possibility of a hike in December in the cards, with odds currently at around 63%, according to Investing.com’s Fed Rate Monitor Tool.
The focus on Wednesday will likely be on whether Yellen can convince markets to maintain those bets even as the central bank announces its plans to unwind the balance sheet.
Source: Bloomberg Pro Terminal
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