FEDERAL RESERVE officials aren’t expected to signal a reduction in support for the US economy when they meet this week, but will debate how to scale back massive bond purchases when the time comes.
Pressure on Chair Jerome Powell to start the taper sooner rather than later has probably been eased by the recent slide in bond yields, as investors worry the spreading delta coronavirus variant could sap the recovery.
He told Congress on July 14 that the economy was “a ways off” from reaching the threshold the Federal Open Market Committee has laid out for reducing monthly purchases — from a current pace of $80 billion in Treasuries and $40 billion in mortgage-backed securities (MBS).
Still, policy makers are expected to discuss when to begin the process during their two-day meeting, with concludes Wednesday, as well as at what pace and whether to prioritize MBS over Treasuries. A statement of their decision will be released at 2 p.m. Washington time, with Mr. Powell holding a press conference 30 minutes later.
A Bloomberg survey shows economists expect a signal of their intentions as early as the central bank’s Aug. 26-28 annual policy retreat in Jackson Hole, Wyoming, as which the Fed chair is likely to speak.
Powell has promised plenty of advance warning and the economists don’t see a formal announcement to scale back bond buying before December and the actual start not until the first quarter of 2022.
Elsewhere, central bankers in Nigeria, Ghana and Colombia set rates and in Europe, Hungary’s central bank will likely continue raising interest rates.
In addition to the Fed, investors in the US await a string of key economic data to end the month.
Early in the week, reports include those on new home sales and durable goods. On Thursday, the market will get its first reading of second-quarter growth — to determine if it’s peaked coming off the pandemic lows last year. Figures on personal income and spending are due Friday.
South Korea gross domestic product (GDP) figures out Tuesday are likely to show a slowing of growth compared with the previous quarter but still in line with government expectations for a 4% expansion this year. An upward surprise may fuel more talk of an early interest rate hike even as rising virus infections offer an unsettling reminder that the outlook is far from certain.
Bank of Japan (BoJ)Governor Haruhiko Kuroda could shed more light on the central bank’s recently announced lending measure to help battle climate change when he speaks later on Tuesday. A summary of opinions released the following day could offer more details on the range of views within the BoJ’s board on how aggressive the bank’s green action should be.
Taiwan and Hong Kong publish GDP data on Friday. On July 31, China will release its purchasing managers indexes for July. — Bloomberg