FOMC meeting recap: Powell projects a November taper announcement

Fed Chairman Powell is clearly leaning toward a taper announcement at the central bank's next meeting in November...


As we noted in our FOMC preview report on Monday, the Federal Reserve was never likely to make any immediate changes to monetary policy at today’s meeting, and that was before fears of Chinese property developer Evergrande collapsing under the weight of its massive debt load reached critical mass this week.

So it certainly wasn’t a surprise that Jerome Powell and company left interest rates and asset purchases unchanged at today’s meeting, but we certainly did get an elusive taper “hint.” In it’s statement, the central bank noted that, “if progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.”

In a phrasing even the notoriously opaque Alan Greenspan would admire, Jerome Powell and company managed to meet the market’s expectations with a nod toward normalizing monetary policy in the near future… without necessarily committing to starting the process at its next meeting in November.

(…at least, in the official statement – more below!)

Beyond that there were three other key aspects of the meeting for hints about how monetary policy will evolve from here:

1)      The monetary policy statement

Beyond the aforementioned taper hint, there was only one noteworthy tweak to the Fed’s monetary policy statement: The committee inserted a nod to the impact of COVID-19 cases slowing the recovery in certain sectors. Needless to say, this minor update was not a meaningful market mover.

2)      The summary of economic projections (SEP)

Thankfully, the accompanying update to the FOMC’s quarterly economic projections was a bit more interesting. The closely-scrutinized “dot plot” of interest rate projections showed an even split between Fed officials (9) who see interest rate liftoff in 2022 and those who see it later than that (9, with 8 of those projecting the first interest rate hike in 2023).

Separately, the median Fed official also increased his or her projection in the following ways:

  • Real GDP growth now projected lower in 2021, higher in 2022 and moderately higher in 2023
  • Unemployment now projected higher in 2021 and lower in both 2022 and 2023
  • Core PCE inflation now projected higher in 2021, 2022, and 2023

Source: FOMC Summary of Economic Projections

On balance, these tweaks point to expectations for a US economic recovery that is posied to play out over multiple years, rather than continuing at a breakneck pace for just 12-18 months.

3)      Chairman Jerome Powell’s press conference

Fed Chairman Powell is still speaking as we go to press, but the early highlights from his press conference clearly suggest that he’s leaning toward November taper announcement:


Reading between the lines, these comments suggest that Fed may have been within a vote or two of starting the taper process at this month’s meeting, a more hawkish development than many were anticipating.

See my colleague Joe Perry's upcoming report for analysis of how these developments are impacting markets!

How to trade with City Index

You can trade easily trade with City Index by using these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

Build your confidence risk free

More from FED

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.