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The Fed is unlikely to formally announce a gradual reduction next week

The critical event for markets next week will be the Federal Reserve meeting. According to analysts at the National Bank of Canada, the meeting may be extraordinary. They don’t expect the Fed to formally announce a reduction in the purchasing program, but they do see a reduction later this year.

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“In the United States, the key focus next week will be the Federal Reserve meeting, although it may turn out to be something extraordinary. After what was a disappointing August employment report, it is unlikely that we will see the Fed formally announce the reduction of its oversized asset purchases. However, we still see that happening this year, so we will be watching Powell’s press conference closely for clues as to the exact timing. “

“While no official announcement is expected in the letters, expect the Fed chair to continue preemptively breaking any perceived link between the timing of the cut and the rate hikes. On inflation, we expect the transitory narrative to prevail again, both in the statement and in the press conference. Finally, the statement will also be published along with a new Summary of Economic Projections. While the June SEP saw improved growth projections and rate hikes carried over to 2022, we don’t expect the same boost this month. “

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