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Powell stands out from Lagarde: the Fed is about to set a date for its ‘tapering’

The Federal Reserve (Fed) finalizes the preparations for the most anticipated meeting of the current Covid-19 crisis: the one that will mark the beginning of the end of the massive monetary stimuli adopted in the last year and a half.

Powell stands out from Lagarde: the Fed is about to set a date for its 'tapering'

Powell stands out from Lagarde: the Fed is about to set a date for its ‘tapering’

Between Tuesday and Wednesday, the central bank that Jerome Powell governs will set a much clearer roadmap than the one drawn this week by the ECB. While Christine Lagarde has made an effort to leave all the doors open and keeps the monetary tightening undated, her counterparts in the US have things much clearer and will mark the calendar in the red.

The FOMC (Fed’s monetary policy committee) holds its two-day meeting with everything in favor to activate the beginning of the end of the stimuli of the Covid-19 crisis. It does so under pressure from a balance sheet that has crossed the barrier of $8 trillion, 100% or $4 trillion more since March 2020, due to the expansion of credit and purchases of assets such as Treasury bonds or mortgage securities.

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The data, a priori, support the central bank in making its most difficult decision with the start of tapering. The US economy continues to grow strongly -at an annual rate of 7% in 2021-, inflation is above the target -it will be 3.4% this year- and the labor market closes the wounds of the Covid with the creation 850,000 jobs in June alone.

Tiffany Wilding, an economist at PIMCO, believes that there will not be an immediate movement but a deferred one.

“The most likely outcome of the meeting is that our tapering announcement schedule in December is confirmed. Surprisingly, the strong inflation data will have little, if any, consequences at the Fed’s July meeting. “

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