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Will the US Fed Surprise Markets at Its September Meeting?

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September meeting back in focus

The US Federal Open Market Committee (or FOMC) will be conducting its two-day monetary policy meeting on September 19–20. This meeting wasn’t expected to be a market mover until the recent rise in US inflation (TIP). US inflation (VTIP) for August was reported at 1.9%, close to the Fed’s 2% target, and gave life to the dying hopes for another rate hike from the US Fed before the end of 2017.

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What could the Fed do this time?

It is always a tough question to answer and it is no different this time. One thing that the markets have assumed is the announcement of a balance sheet reduction program. It’s expected that the Fed will signal the beginning of the balance sheet unwinding program at this September meeting, and October could be the first month when the Fed starts allowing a small portion of its massive balance sheet to mature without replacing these maturing securities. The focus, however, will likely be on the Fed’s views on interest rates. Will the Fed signal another rate hike in this meeting?

Series overview

In this series, we’ll examine the improvements in the US economy since the last Fed meeting and discuss whether these developments could warrant an accelerated Fed tightening. We’ll also discuss the possible reactions to different asset classes like equity (SPY), fixed income (BND), and the US dollar (UUP) if the Fed signals another rate hike before the end of 2017.

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