The Federal Reserve’s next meeting is this week.
It’s a 2-day meeting that concludes on Wednesday, and it’s safe to say that it’s the most anticipated such meeting in a long time.
Two charts help to convey this.
One is simply a search of the financial news headlines for the word “tapering” which refers to the notion that the Fed will start buying fewer bonds each month as part of its QE program.
Mentions of tapering (red line) have exploded since the start of May, reflecting the growing chatter of this possibility.
There’s virtually no way the Fed announces anything official on this front, but any hint that it gives about what it’s thinking with regard to the future of QE will be watched closely.
Now on the real economic front, the big story in global markets has been the turn in interest rates.
Whether it’s real interest rates, nominal US Treasury rates, or mortgages, there’s been a sharp turn up since the start of May.
Rates are still low by historical standards, but this sharp turn represents a break from post-crisis trends.
The question is whether this is a head fake or if this is really “the big one” so to speak. What the Fed says about its future actions and its forecast for the state of the economy will help answer this question.
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