This week’s Federal Open Market Committee (FOMC) meeting will capture significant attention as the Federal Reserve (Fed) provides its perspective on the path for interest rates and the future of its asset purchase programs. This meeting occurs at an important time, with inflation continuing to rise above the Fed’s target levels. The year-over-year growth in inflation rose to 5.4% in June, the highest in more than a decade. The language that the Fed chooses to describe inflationary pressures also has implications in Washington, as the talk about inflation draws growing political scrutiny and puts the Fed in an uncomfortable position.
The Fed must contend with the resurgence in the global pandemic due to the Delta variant when setting monetary policy. The pandemic’s impact makes the near-term path for growth in the economy more uncertain. The Fed will likely shed more light on its plans for tapering its asset purchases during the post-meeting press conference, when I expect Fed Chair Powell to provide more context around several of the key issues facing the Fed that may not be addressed in the post-meeting statement.
Stocks in the U.S. reached new highs last week, with strong corporate profits playing a key role. Barring a surprise from the Fed this week, I expect near-term market trends to continue.
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