This week, the Federal Reserve (Fed) meeting will be closely watched for any change in the Fed’s dovish stance. I expect the Fed to acknowledge the improvement in the economy but signal that it will not change monetary policy in the near term. The markets will be looking for any indication of when the Fed will begin tapering its purchase of Treasury bonds.
The recent announcement of potential tax increases by the administration will likely keep the Fed in a wait-and-see mode regarding the economy and the corresponding impact on economic activity. The dialogue about taxes in Washington is likely to create uncertainty for the latter part of the year. Still, it occurs while earnings season continues to be very strong, with many companies beating Wall Street’s expectations.
I don’t expect any surprises from the Fed and will be watching policy in Washington for any unexpected developments related to markets.
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