The Federal Reserve’s next Federal Open Market Committee meeting is mid-Dec. Standard Chartered analysts say the Fed could ease policy again prior to then.
- the huge surge in COVID-19 infections
- the stumbling over further stimulus in a now ‘lame duck’ Congress
Stan Chart analysts say if the Fed considers it necessary to ease its likely to do so in coming weeks, ahead of the FOMC meeting. Not to wait until the meeting.
Likely policy action includes:
- increase monthly US Treasury purchases by about 50% (i.e. to USD 120bn / mth)
- could add measures targeted at encouraging credit provision to business
While there are already some market expectations of a move at the December meeting an earlier move would have an impact from (1) the ‘surprise’ timing and also by (2) a concerned Fed acting aggressively.
Stan Chart say:
- Treasury yields would fall immediately
- USD likely to fall against G10 currencies
A move by the Fed like this would heighten market concerns on the US (and global) economy; a between-meeting move is not undertaken by the Fed because they are happy with the state of, and their outlook for, the economy.