Inflection point is approaching for Fed, according to AllianzGI By Reuters

PARIS (Reuters) – The Federal Reserve is not expected to make a spectacular announcement on Wednesday, contenting itself with giving a reassuring speech to the markets, but the time when it will have to signal a change in its monetary policy is approaching, it is said at Allianz ( DE 🙂 Global Investors.

Fed Chairman Jerome Powell is expected to reiterate after a two-day meeting of his institution’s monetary policy committee the message sent in recent interviews by signaling a strong economic recovery but not yet widespread enough to restore a situation full employment, predicts Franck Dixmier, director of bond investments for the management company.

“At this stage, there is no urgency to normalize US monetary policy,” he wrote in a note released Monday.

The US central bank should therefore, according to him, stick to a pragmatic approach by keeping its eyes riveted on the employment and inflation figures.

The Fed must however be prepared to take into account a change of regime and think carefully about when it will have to mark out the gradual withdrawal of its monetary support (“tapering”) to accompany the recovery of the economy, he adds.

“Of course, the gradual increase in long-term rates is an ideal scenario for the Fed and should make it possible to avoid a violent shock when the normalization of monetary policy begins,” writes Franck Dixmier.

“However, we are approaching the inflection point of monetary policy and the time for the decision is clear. The timing of ‘tapering’ (its announcement and then its implementation) is key for the markets, and the longer the Fed will wait. , the greater the risk of an accident. “

(Patrick Vignal, edited by Blandine Hénault)

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