Fed Watch

Powell Gives Additional Coloring on Tapering Schedule and Addresses Evergrande Risk

The Federal Open Market Committee meeting took place in the shadow of one of the most vicious market selloffs of 2021 which occurred Monday. While the market sell-off was probably mostly triggered by the insolvency of Evergrande, the Chinese property development giant, the market is also in a seasonally challenging time and is facing a litany of tail risks.

Powell addressed the tapering schedule and if the hawks had an edge, it may have been mitigated by the levels of fear and apprehension in markets in the preceding days. The market largely appeared pleased with Powell’s remarks and despite not announcing a taper, the Fed certainly appears to be taking every possible caution to keep markets sufficiently apprised as to avoid a tantrum.

The tagline of Powell’s conference could probably be surmised in the following quote, “The Fed judges that a moderation in the pace of asset purchases may soon be warranted.” So, consistent with previous messages from the Fed Chair, the committee is sticking with the judgement that even though Delta has wrought havoc from a healthcare perspective, our society has adapted to this reality enough to ensure robust enough economic growth to justify tapering asset purchases is still occurring.

Powell also addressed Evergrande directly. ...

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