Fed Telegraph bond reduction coming soon – three experts react

Fed Telegraph bond reduction coming soon - three experts react

The Federal Reserve again left rates unchanged on Wednesday, but said “sooner may be warranted” if the economy continues to advance.

Three experts discuss the decision.

Liz Young, head of investment strategy at SoFi, expects the Fed’s decline to be slow and steady.

“Growth is happening, but it’s happening very, very slowly… even though they’re at a rate that we’d expect, they’re still buying a lot of bonds by the first half of 2022, so it’s not. as if all of a sudden liquidity is going to leave the system or leave the picture. There is still a lot of cash they are putting in. In terms of market action, I think before I announced that what was interesting was that the 10 year yield had gone down and stocks were bullish. So basically you could assume that the market was expecting a lethargic statement, but if you pull back a bit and see that it was indeed the sectors that were moving, so it was cyclical, it was the materials, that was. was energy, it was financial, it was industrial. So that would suggest that the market is actually ready for a slight take-off and a slight hike in rates in 10 years. And I think that’s what we’ll see slowly. “

David Kelly, chief global strategist at JPMorgan Asset Management, presents his schedule for the Fed.

“I think it was interesting that they initially indicated that they were still on the right track to add that sentence about reducing asset purchases. I think it was an echo of the president. East [Jerome] Powell has said several times before how he would give us a lot of notice. So this is the first official warning that registration is coming. I think it is coming in December. I think they will announce a schedule in November and start cutting back on purchases in December.

John Bellows, portfolio manager at Western Asset, saw slowing economic growth as an obstacle to the Fed’s debt reduction plans.

“We have seen a significant decline in US growth. Obviously, there is a global growth concern emanating from China. It is not only a problem of financial stability, but instead there is also a general slowdown in growth. And that’s a big deal. That’s a deal for the Fed because a lot of its outlook for 2022 and beyond is strong global growth, and so if you’re in a period of slow global growth, I think there are implications for it. your rate hikes.

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