Reduction or no reduction? This is the question hovering around the market ahead of the FOMC policy announcement in the early hours of Thursday morning.
After seeing several gains in key economic indicators, the issue of reducing bond purchases (tapering) resonated despite the Federal Reserve (Fed) having repeatedly stated that it was still too early to discuss it.
The Fed also set a benchmark for downgrading taking into account that the job market is still weak, despite rising inflation.
Nevertheless, since last month’s policy meeting, there have been a number of policymakers who have voiced concern over the recent rise in inflation and expressed the need for them to start discussing reduction.
Speculation is now strong saying that the Fed will start giving hints of a reduction at this time meeting.
However, at the same time, the market also expects that the Fed will maintain its current monetary policy approach.
This is because, if looking at the latest economic data published after last month's policy meeting, the inflation rate showed a decline in May compared to the previous one, while the job market failed to meet expectations to rise higher.
So, will the stance of previous policymakers remain the same or change?
In addition to looking for clues to policy changes, the market is also focusing on the US economic growth projections this year and beyond.
Any hawkish -toned statement will push the US dollar higher, and the opposite movement will occur if the Fed continues to remain dovish -toned.
