Fed Announces Start of Tapering, Signals Inflation Concerns

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Key Takeaways

The US Federal Reserve is ready to start tapering by $15bn per month and finish by June 2022
The central bank signals inflation pressures might stay for longer than anticipated

What’s on Focus in the Markets?

After 18 months of consistent monthly cash injections, the Federal Reserve is finally ready to step on the brakes. Closing a chapter of pandemic-fueled stimulus the US central bank will dial down its extraordinary bond-buying program.

That became clear when Federal Reserve Chairman Jerome Powell presented the Fed statement in a press conference on Wednesday. Concluding a two-day policy meeting, Mr. Powell said Fed officials agreed to unwind the $120bn in monthly asset purchases.

Initially, for November and December, the pace of withdrawing the stimulus would be $15bn per month. With this in mind, the Fed Chairman predicts the purchases could be phased out by June 2022.

The historical step by the US central bank comes amid rising inflation concerns that could last longer than anticipated. On this note, Mr. Powell struck a wary tone on higher prices.

“What’s happened—and we’re very, very straightforward about it—is that inflation has come in higher than expected,” said Mr. Powell. “We see that just like everybody else does, and we see that they’re now on track to persist well into next year.”

Where Are Stocks Headed?

Major stock averages in the US reversed early-session losses on Wednesday after Mr. Powell commented on the US economy. He said that there has been “substantial further progress” toward the Federal Reserve’s goals. In particular, these goals are maximum employment and stable prices.

As a result, all three major indexes finished in the green in what became their fourth straight record-setting session. Moreover, the S&P500, the Nasdaq Composite, and the Dow Jones Industrial Average have been on a winning streak recently.

Overseas, the Stoxx Europe 600 ticked higher on Wednesday, also closing at a record.

What’s the Latest News on Bitcoin?

In cryptocurrency trading, digital assets continued moving to the upside on Wednesday. That said, the entire crypto space topped a valuation of $2.9 trillion for the first time in history. The upswing was largely a result of a rallying Ether. The second-biggest coin in the market pushed to a fresh record of $4,665.

Bitcoin, the leading crypto, remained pinned near $63,000 apiece. Presently, the orange coin is trading slightly lower, while Ether floats around $4,600.

In the meantime, Shiba Inu has landed for trading on our own platform. The Shiba Inu coin advanced 700% in October alone and crossed a valuation of $40bn. Today, the token has retrenched a bit and boasts a market cap of about $30bn.

What’s Next for Traders and Investors?

On Friday, the US Labor Department will publish the latest jobs report. In other words, the nonfarm payrolls report for October will highlight the pace of economic recovery. It will reveal how many new jobs were created over the past month.

During the release, high volatility is expected across the financial markets.

Today’s Economic Calendar (EST times)

08:00 am, GBP, BoE Inflation Report
08:00 am, GBP, BoE Interest Rate Decision (Nov)
08:30 am, USD, Initial Jobless Claims
09:00 am, EUR, ECB President Lagarde Speaks
10:15 am, GBP, BoE Gov Bailey Speaks