This week (20th to 24th), the New York Stock Exchange (NYSE) is expected to spend a volatile week at the Federal Reserve’s regular meeting of the Federal Open Market Committee (FOMC).
In September, all three major U.S. indexes have turned downward. This is because investor sentiment in the market has shrunk significantly due to concerns over an economic slowdown caused by the spread of the new delta mutation and vigilance against tapering, a reduction in the Fed’s asset purchase program.
Until the 17th, the Dow Jones 30 Industrial Average fell 2.19% in September, while the Standard & Poor’s 500 Index fell 1.98%. The NASDAQ index fell 1.41%.
The Dow fell for the first time in three months in September, the Nasdaq index turned downward for the first time in four months and the S&P 500 index turned downward for the first time in eight months.
The FOMC results will be released on the 22nd of this week. Until then, the market is expected to enter standby mode.
Economists believe that the Fed may only discuss tapering at this week’s meeting and give only a signal that it will carry out tapering by the end of this year.
Michelle Mayer, an economist at Bank of America, said the Fed would like to take a “baby step” and expected to announce tapering in November and start tapering before the end of the year.
The Fed hopes to give enough signals to the market to mitigate the impact of tapering.
Therefore, there is a possibility that the market may not be affected by the results of the September meeting.
However, market participants are paying attention to how the dot chart, which includes Fed members’ interest rate forecasts, will change.
In June’s dot chart, committee members expected two rate hikes in 2023. This was pulled from the previous forecast, which was expected to raise interest rates for the first time in 2024, and attention is being paid to whether it will be further pulled this time.
At that time, seven members expected a rate hike in 2022 at the FOMC. If more and more people predict a rate hike in 2022, the timing of the rate hike could be pushed forward. On top of that, it is also noteworthy whether the number of rate hikes in 2023 will increase.
If the timing of the rate hike is pushed back or the number of rate hikes in 2023 increases, the market can read it hawkishly due to concerns over the pace of austerity.
However, Fed Chairman Jerome Powell previously mentioned that the criteria for raising interest rates will be higher and stricter, and stressed that the rate hike will not take place immediately after tapering.
Chairman Powell is likely to make similar comments at the press conference.
Chairman Powell will attend an event hosted by the Fed online on the 24th of the second half of the week and make an opening speech. As the theme of the event is “view on the recovery of the Pandemic economy,” it is expected that the Fed’s judgment on the current economic recovery will be read.
As Congress will be held again this week, attention is being paid to whether there will be progressed news on $3.5 trillion in spending, $1 trillion in infrastructure bills, and negotiations on debt limits. In particular, the market believes that the debt limit negotiations should be completed by some point in October when the Treasury’s cash is exhausted.
Otherwise, the United States will face an unprecedented default situation. Congress is expected to reach an agreement to prevent such a situation, but labor is expected during the negotiations.
