Will they speak about rising interest rates
The Fed is in a tough spot. If they continue to say that the rise in bond yields is a sign of economic confidence or say nothing at all, then it’s a greenlight for more. Eventually that could truly tighten financial conditions.
On the other hand, if they come out and say they’ll buy more bonds, that’s an overreaction.
The trick may be somewhere in the middle, saying that they’re on guard against disorderly or rapid moves higher in yields and reiterating that it will be ‘some time’ before they taper. If that doesn’t work, they could try a WAM extension or at least hint that it’s in the toolbox.
Top officials will have plenty of opportunities to send a message in the week ahead.
- Beige Book
- Powell in a Q&A with the WSJ