Wall Street down pending the announcement of the FOMC, the Fed’s monetary policy arm, scheduled for 8pm Italian time. The Dow Jones lost 0.37% to 35.412 points; the S&P 500 fell 0.27% to 4,620. The Nasdaq is down, falling by 0.53% to 15,154 points.
The economists interviewed by the CNBC said they believe that today’s big announcement will concern tapering, therefore the reduction of the Fed’s asset purchase program, or the bazooka launched in 2020 to face the emergency of the Covid-19 pandemic. The Fed should decide to speed up the cuts in purchases – currently the cuts amount to just $ 15 billion a month, thus bringing the total assets still being purchased each month to $ 105 billion -, doubling them to $ 30 billion.
In this way, the end of the tapering plan would be brought forward, from June to March 2022, to leave the central bank with free hands to start raising, starting from next year, the rates on fed funds, which are still nailed. , since last year, in the range between zero and 0.25%.
Analysts interviewed by the CNBC believe the Fed will start raising rates twice next year, twice in 2023 and 2024.
Analysts at Goldman Sachs, as well as Morgan Stanley, agree with the consensus of economists that the Fed will double the pace of tapering to $ 30 billion a month.
In their view, the dot plot will show two rate hikes in 2022, three tightenings in 2023, four in 2024, for a total of nine tightens over the next three years.
As for Goldman Sachs’ own forecasts, economists estimate that the FOMC will raise rates three times in 2022, or in the months of May, July and November (compared to the months previously identified in June, September, December), and then raise the rates four more times, two in 2023 and two in 2024, for a total of seven times until the end of 2024.
For his part, François Rimeu, Senior Strategist at La Française AM, said:
“We believe the Fed will announce a doubling of the pace of tapering to $ 30 billion per month starting in mid-January 2022 (it initially announced the figure of $ 15 billion). This would result in the end of Quantitative Easing in March 2022 (and not in June.) As a result, the dot plot will show rate hikes earlier than expected: two next year (0.625%) and five more until 2024 (three in 2023, by 1.375%, and two in 2024, 1.875%). Long-term FED funds will remain unchanged at 2.5%. “
Rimeu again:
“We are of the opinion that the SEP (Summary of Economic Projections) will show lower growth for 2021 (from 5.9% to 5.5%), but higher GDP growth in 2022 (from 3.8% to 3.9%), with unchanged growth in 2023 and 2024 (respectively at 2.5% and 2%). Finally – continues the expert – the FOMC should revise its forecasts of PCE inflation (Personal Consumption Expenditures / personal consumption expenses) higher, with forecasts increasing from 4.2% to 5.3% in 2021, from 2.2% to 2.4% in 2022, and unchanged in 2023 and 2024, respectively at 2 , 2% and 2.1% “.
From the macroeconomic front, the US retail sales figure was released today, up 0.3% in November, below the expectations of analysts, who had forecast a rise of 0.8%, after the jump in October equal to + 1.7%. Excluding the auto sector, the figure reported an increase of + 0.3%, again disappointing the estimates, which were for an increase of 0.9%. The previous October ex-auto figure was revised down from + 1.8% initially disclosed to growth of + 1.7%. Excluding both auto and gasoline sales, retail sales rose 0.2%, less than the + 0.9% estimated in this case too.
10-year Treasury rates advance to 1.451%.
Forex market at attention pending the announcement of the FOMC, the monetary policy arm of the Fed, scheduled for 20.00 Italian time. Neil Jones, head of forex division at Mizuho, however, pointed out to CNBC that it is possible that the Fed is more dovish than the markets are pricing in and that, as a result, the dollar’s reaction to today’s announcement may be bearish.
At 16.00 and also in view of the meeting of the Governing Council of the ECB, expected tomorrow, the euro-dollar ratio, which was previously on the rise, weakens and returns to a flat trend at $ 1.1257. The dollar advances against the yen at JPY 113.83.
Pending the Bank of England, which will also meet tomorrow, the sterling-dollar ratio clears the previous rises and is barely moved at $ 1.3227, despite the publication of the inflation figure in the United Kingdom, with the consumer price index flew to 5.1% in November.
Watch out in this regard to the alert that was launched yesterday by the International Monetary Fund at the Bank of England.
The IMF has warned the BoE against the risk of not acting against inflation, advising it not to remain inert in the face of the jump in prices given that, according to estimates by the Washington institution, UK inflation will likely hit the record high. last 30 years next year, flying at 5.5%. The single currency advanced on the yen by 0.10% to JPY 128.13, also rising against the Swiss franc, with + 0.22% to CHF 1.0427.