“Given the uncertainty about the pandemic, fiscal policy and economic data, it seems unlikely that they will make any significant announcement,” said David Kelly, chief global strategist at JPMorgan Funds.
The Fed’s next policy update comes out Wednesday at 2pm ET, followed by a press conference with Chairman Jerome Powell at 2:30 pm ET.
Kelly expects the central bank to announce a stimulus rollback in November that would start in December.
The Fed currently buys $120 billion worth of assets every month — $80 billion in Treasury securities and $40 billion in mortgage-backed securities.
The US stock market recovered swiftly from the market crash at the start of the pandemic thanks to the sugar rush of stimulus money from the government and the Fed. But stocks would likely take a hit if the money taps were turned off.
This expectation has brought back unpleasant memories of the 2013 “taper tantrum,” when financial and, specifically, bond markets panicked about the Fed’s decision to wind down 2008 crisis-era stimulus. Analysts expect Powell will choose his words very carefully Wednesday when communicating any changes to the market.