One of the best ways for Powell to defuse the scenario is by first acknowledging that the tempo of tapering isn’t on autopilot and that the central financial institution reserves the best to hurry it up or sluggish it down primarily based on incoming information. It could take a extreme shock for that to occur, after all, however simply hinting at that optionality would present that it hasn’t deserted its dedication to maintain inflation well-anchored. Second, he can be smart to avoid straight making an attempt to affect the market pricing of short-term charges, solely saying that officers had been cut up about rising the fed funds charge in 2022 as of September, and that they are going to replace their forecasts subsequent month primarily based on the most recent info. Because it stands, I’d count on December’s dot plot to mirror a median expectation of 1 charge enhance inside a 12 months, assembly present market pricing midway.
https://www.washingtonpost.com/enterprise/the-bond-market-is-a-powder-keg-can-the-fed-defuse-it/2021/11/01/02afb53a-3b03-11ec-bd6f-da376f47304e_story.html?utm_source=rss&utm_medium=referral&utm_campaign=wp_business | The Bond Market Is a Powder Keg. Can the Fed Defuse It?