Tomorrow is one Federal Reserve meeting more anticipated than usual. Not that the markets are expecting particular jolts from Jerome Powell's words, but the scenarios of the economy and the US monetary policy in 2022. The Fed meeting will in any case be an important appointment to monitor in order to update the considerations of the world's leading economy on what is happening in terms of inflation.
"I expect a confirmation of the net gradual reduction of the purchase of securities on the market. Tapering had already been announced in the last meeting, for a figure close to 15 billion per month: perhaps it could be further strengthened given the latest numbers on theinflation, calculated at 6,8%. Powell also said in recent days that the term "temporary" should no longer be used to talk about inflation. I would add that at these levels it is still a "temporary" figure. While it will take some time to see it reposition itself towards the 2% threshold". That's what he observes Angel Baglioni, economist at Cattolica and author of the book “The frontiers of monetary policy. From quantitative easing to negative rates”.
Politics permitting, in the USA we are therefore moving towards a new set-up of monetary policy through a gradual exit strategy from easing policies and interest rates close to zero. «Historical experience helps us to outline very precise stages in these scenarios - continues Baglioni - We always start with the Tapering, as is happening in the United States, and only later does the phase of increase in interest rates. In general, then, there is a reduction in the stock of the securities portfolio held by the Central Bank. However in this particular economic environment, even if the Fed is geared to reduce its net purchases, it is likely to maintain a constant securities portfolio in the coming years, renewing the financial instruments due to expire".
The great question relating to the immense liquidity circulating on world markets will therefore remain on the ground, to which must be added the no longer transitory variable of inflation destined to accompany the post-Covid economic cycle for a long time, in the United States and in the euro area . According to Baglioni, «it will remain in the global economic scenario a large money supply and the balance sheets of major central banks will remain very large. The expansive orientation will remain in the financial scenarios yet for a long time».
While awaiting the so-called "new normal" of Western monetary policies, it remains to be seen what will happen to the markets when preparations for real rate hikes begin. «I don't think the markets will have big reactions in the very short term – concludes Angelo Baglioni – For the moment everything is already taken for granted in the analyzes and forecasts of the operators, also with regard to inflation expectations. We will only observe the real change of pace in a few months, when the Fed will announce the first phase of rate hikes of interest, presumably towards half of the 2022. With the increase of the Federal Funds we will enter a new season».
