On Thursday morning at 02am, the Federal Open Market Committee ((FOMC)) will release the minutes of its July meeting. Any discussion in the Fed minutes of scaling back its $120 billion bond-buying program will be a factor affecting the market.
FOMC decided to keep its key interest rate near zero at a policy meeting that ended on July 28th local time. The Federal Reserve said the US economy and job market continued to strengthen, reiterating that the rise in inflation was only a temporary factor and continued to move towards a curtailed bond-buying program.
The statement reiterated the Fed's view on inflation, that is, it seeks to achieve inflation moderately above 2% for a period of time, so that the long-term inflation average reaches 2%, and longer-term inflation expectations remain firmly anchored at 2%. 'The rise in inflation largely reflects the impact of temporary factors, 'the statement said.
Fed Chairman Colin Powell (Jerome Powell) said at a news conference on July 28 that the Fed was "still some way from considering raising interest rates." Powell pointed out that before scaling back on bond purchases, he hopes to see some strong employment data in the coming months.
James Knightley, chief international economist of ING, said: "the minutes of the July FOMC meeting may discuss some aspects of the potential reduction plan. The latest employment and inflation data have accelerated the debate, so more attention will be paid to the composition of the cutback measures than to the timing. We now increasingly believe that we may announce a slowdown in monthly asset purchases in September, down from the current rate of $120 billion a month and starting to cut back in October. We suspect that this reduction will be much faster than last time and may end at the end of the first quarter or the beginning of the second quarter in 2022. "
Fed officials are reported to be close to reaching an agreement that they will begin to scale back loose monetary policy in about three months if the economic recovery continues, and some officials are pushing for an end to asset purchases by the middle of next year.
The article points out that in recent interviews and public statements, some Fed officials advocated a timetable that if the economy moves quickly towards their goals, they can raise interest rates faster than currently expected.
Fed officials discussed two important issues at their July 27-28 meeting: when to start cutting back on their monthly purchases of $80 billion of Treasuries and $40 billion of mortgage securities (MBS), and how quickly to scale back their bond purchases. The Fed will release the minutes of its meeting on Wednesday local time, which could provide further clues to these discussions.
The answers to these questions are crucial to financial markets because Fed officials have said they would prefer to end their bond-buying program before considering when to raise interest rates from near zero. At the June 15-16 policy meeting, 13 of the 18 Fed officials expected them to raise interest rates by the end of 2023; seven officials expected to achieve that goal by the end of 2022.
Under the new framework policy announced last year, the Fed agreed to keep interest rates close to zero until the labor market reached full employment, with an average inflation rate of 2 per cent and moderately over 2 per cent for a period of time.
Fed officials said in December that they would continue to buy bonds at a rate of $120 billion a month until further progress was made in terms of inflation and full employment.
(CBA), the Australian federal bank, said the dollar had reason to rebound if the minutes of this week's Fed meeting showed that committee members were considering scaling back their asset purchases as early as next month.
On Tuesday, Aug. 17, the dollar rose for the second day in a row, boosted by safe-haven demand. Investors are worried about the economic slowdown in Afghanistan and China and the rapid spread of the Delta mutation, which has forced some countries to impose blockades.
However, the US retail sales reported on Tuesday fell much more than expected, curbing the rise of the dollar. The dollar index closed up 0.57% at 93.13 on Tuesday, hitting an intraday high of 93.17.
According to the latest figures released by the commerce department on Tuesday, us retail sales fell 1.1 per cent in July, down from a revised 0.7 per cent increase in June, which was well below economists' expectations of 0.2 per cent growth. This is the second time in three months that consumers have cut back on spending.
Karl Schamotta, chief market strategist for global payments in Cambridge, Toronto, confirmed in a retail sales report on Tuesday that American consumers-the world's largest and most reliable consumers-are becoming more cautious.
Daniel Pavilonis, senior market strategist at RJO Futures, said the stronger dollar put some pressure on metals. However, gold has benefited from the unrest in Afghanistan. Gold is often used as a safe hedge in times of political and financial turmoil.
Carlo Alberto De Casa, an analyst at Kinesis, pointed out that the political turmoil in Afghanistan has brought risk aversion to the market, and investors are transferring some liquidity to gold.
Lukman Otunuga, a senior research analyst at FXTM, said in a report that if gold closed above $1792, it could open the door for gold to rise to $1800 and $1830.
Us stocks fell on Tuesday on lower retail sales in July and heightened concerns about a slowdown in global economic growth. The Dow fell 282.12 points, or 0.8%, to 35343.28, after falling as much as 500 points in intraday trading; the standard & poor's 500 index fell 0.7% to 4448.08; and the Nasdaq composite index fell 0.9% to 14656.18.
On Tuesday, local time, Federal Reserve Chairman Colin Powell said it was not clear whether the spread of Delta would have a significant impact on the US economy.
Both the Dow and the S & P 500 ended five consecutive days of gains. Tuesday's decline came after the two major indexes hit record highs in the previous session.
Some analysts said that the recent strong performance of US stocks is mainly due to ultra-loose US monetary policy, large-scale fiscal spending measures and improved performance of listed companies, but the positive factors continue to weaken. If the Fed minutes are hawkish, U. S. stocks could face the risk of a further correction.
Craig Erlam, a senior market analyst at Oanda Europe, pointed out that the market is still more focused on the Fed, and this situation is unlikely to change unless the outbreak caused by the Delta strain deteriorates sharply.
