17.09.202107:42 Forex Analysis & Reviews: Dennis Lockhart: Fed may announce taper in November

In the last few days, US stock indices have been declining. However, so far, this drop is still too weak to be interpreted as a correction. The foreign exchange market has revived a little in the last couple of days. Traders are rather curious about whether this was a simple coincidence or not. The Fed will hold a meeting next week. It is sure to have a big impact on the market even if no important decisions are made during this meeting. In the last 2-3 months, there have been many talks about when the Fed will start trimming the quantitative easing program. Naturally, the regulator will take into account the latest Nonfarm Payrolls and inflation reports when making a decision on monetary policy. When these reports were published, they did not bring any clarity. Experts are still polarized when it comes to monetary policy tightening. The first group believes that the gradual easing of the QE program will be announced in September. The second group argues that this decision will be made no earlier than November or even in December.

Former Federal Reserve official Dennis Lockhart reckons that the Fed will not rush to make such an important decision and will wait at least until November. Waiting for Novermber will enable the FOMC members to study more data on the labor market's recovery and economic growth. "This is a first step in the gradual normalization of monetary policy. Assuming continued recovery of the US economy and the closing of employment and inflation gaps, the Fed's policy interest rates would begin to rise at some point next year," he stressed. Earlier, several policymakers spoke in favor of tapering QE as soon as possible as the labor market was recovering at a good pace. Additionally, inflation has grown strong enough to start reducing the bond-buying program. Jerome Powell did not provide any comments on this issue. The latest Nonfarm Payroll report showed a sharp decline and inflation slowed in August by only 0.1% on an annual basis. Lockhart also warned that if the macroeconomic reports turn out to be weal in September and November, this may be a reason to postpone the reduction of QE.

Thus, one can hardly be sure that the Fed will announce a tapering quote soon. The US dollar is likely to nosedive if the Fed decides to trim QE. So, its future trajectory hugely depends on the Fed's decision. The US stock market may, on the contrary, resume growth and continue to reach its all-time highs. The reduction of the asset purchases will mean that money will continue to flow into the economy, settling on the cryptocurrency, stock? and real estate markets. Thus, bitcoin may extend its rally.