Aglance at the next steps of the Federal Reserve to fight inflation.
Before and during the coronavirus pandemic, the Federal Reserve purchased Treasury bonds to invigorate the economy. The central bank was the largest purchaser of newly issued U.S. debt and created trillions of new dollars while doing so.
The Fed is now allowing its securities portfolio to run off as bonds mature as part of its effort to raise interest rates, cool the economy and quell inflation. Joseph Adinolfi thinks a liquidity crisis will result from the Federal Reserve’s actions.
What will the Federal Reserve decide next week?
On September 21, the Federal Open Market Committee will meet and then the Federal Reserve will decide on interest rates. The federal funds rate target will likely increase by 0.75 percentage points and the bank’s bond portfolio will be accelerated, which will be a catalyst for long-term interest rates to rise.
Investors and traders are always interested in gauging how much these actions have already been accounted for in securities prices. On September 13, when the S&P 500 dropped 4.3%, financial markets were hypersensitive to any disappointing news on inflation. You might also be interested in reading — How to Trade Bitcoin with MT4 Bybit
