14.10.202107:03 Forex Analysis & Reviews: Rafael Bostic: The Fed needs to wind down the QE program in November.

On Wednesday, the key US stock indices continued to remain within the correction, which has lasted for several weeks. The NASDAQ and S&P 500 indexes ended Wednesday with a slight increase, and the Dow Jones index slightly declined. But the overall picture has not changed. Recall that yesterday the inflation report for September was published, and it turned out that prices accelerated again in their growth, to 5.4% y/y. Also, recall that the value of 5.4% is the maximum value for the last 13 years. If inflation accelerates to 5.6%, it will be the highest value in the last 30 years. Thus, investors have something to worry about.

Meanwhile, the head of the Federal Reserve Bank of Atlanta, Rafael Bostic, said that a decrease in the number of new jobs created in the American economy by the end of September could not be a reason for refusing to curtail the quantitative stimulus program in November. We also recall that the last two reports on Nonfarm turned out to be much weaker than forecasts and showed a significant slowdown in the indicator. However, Bostic believes that the labor market has already recovered to good values and, in any case, will continue to recover, just at a slower pace. "I am not against starting to wind down in November. I think that the necessary progress has been made, and the sooner we start winding down, the better," the head of the Atlanta Federal Reserve Bank said in an interview with The Financial Times. Bostic also noted that the number of open vacancies is near a record level, and people looking for work find it. Moreover, the situation in the labor market should improve due to the stabilization of the situation with the "coronavirus." One of the Fed's monetary committee members also believes that it is necessary to start reducing QE as early as possible to create the possibility of raising the key rate if necessary in 2022.

A similar opinion was voiced yesterday by US Federal Reserve Deputy Richard Clarida. He also believes that the labor market has recovered quite well, and high inflation has dragged on longer than initially expected. Moreover, it has not yet begun to decline, and there is a risk of its continued growth. Thus, Clarida believes that it is necessary to curtail QE in November. However, the last word on this issue will remain with Jerome Powell, who has taken the most cautious position in recent months, stating that the labor market has not recovered enough to deprive it of support in the form of QE. Thus, there are also people on the Fed board who do not want to rush to cut incentives. Nevertheless, the probability of the beginning of the completion of the QE program in November is now about 70%. Despite the weak Nonfarm report and strong inflation in September.