“The Fed is about to signal that it needs to accelerate its tapering process, but the market price could still be more aggressive,” Nordea analysts say in a recent report. “The ECB will proceed more slowly. The Chinese authorities are also more concerned about the growth prospects.” This process, also known as “tapering,” cut monthly purchases since November by $ 10 billion for Treasuries and $ 5 billion for mortgage-backed assets.
The market is already taking for granted a 25 basis point hike in US interest rates in May, and a move by the Federal Reserve to accelerate the end of its bond-buying program is likely to boost the dollar, especially against lower prices. currencies whose central banks are likely to be slower to adjust monetary policy.
A delicate context where the president of the US central bank, Jerome Powell, and the rest of senior Fed officials will have to make an effort to anchor inflationary expectations without preventing the withdrawal of stimulus from disrupting their path to full employment.
“The biggest problem for the Fed is the growing evidence of a strong pick-up in cyclical pressures on prices. Although we think headline inflation has peaked, it will only decline gradually during the first half of next year and, above all, due to With mounting cyclical pressure, we expect core inflation to remain above the Federal Reserve’s 2% target for an extended period, “says Paul Asworth, US economist at Capital Economics.
As Edward Moya, senior market analyst for OANDA, explains to elEconomista, the accelerated reduction in purchases by the Federal Reserve “will trigger a flight to havens within equities that will lead investors to buy technological securities.” “What complicates this move away from risk is the growth outlook, which will remain mostly intact for next year, possibly at 4%. It is possible that the Federal Reserve was wrong about inflation and that could lead to a race to hike rates, which could increase the risks that the economy will head in the wrong direction after next year, “he adds .