Earlier, market participants were awaiting US Fed Chair Jerome Powell's speech in Jackson Hole and the US nonfarm payrolls report. However, both of these events disappointed traders. Thus, Jerome Powell did not specify when the Fed would wind down its quantitative stimulus program. Moreover, the Fed is still considering whether this step will be useful or not. That is, there is no guarantee that the Fed will announce a gradual reduction in cash injections into the US economy in September. The US jobs report turned out to be three times weaker than forecasts and four times weaker than the July indicator. On the one hand, such a decline was quite expected, since the labor market cannot post an increase of 1 million jobs every month. On the other hand, this indicates a recession. It should have made Fed members concerned as in August, the US reported a new surge in coronavirus cases. Earlier, many economists could not accurately answer the question whether the new wave has affected the country's economy or not. Now the answer is clear: indeed, the new wave has had an impact on the US economic development. In this case, the US economic recovery may slow down in the future, which, in turn, may force the regulator to postpone a possible wind-down of its quantitative easing program for an indefinite period.
Now market players are focused on the upcoming report on inflation in the United States to be released on September 14. Notably, in June-July, inflation rose to 5.4%, the highest level in nearly 13 years. According to Jerome Powell, this acceleration in consumer price growth is temporary. However, more and more economists believe that this is not the case. For example, the growing real estate market is cited as evidence. The US is currently experiencing an unprecedented rise in house prices. Experts note that current prices have already exceeded the previous peak by 40% and continue to grow. Along with the US stock indices, the real estate market continues to grow due to hundreds of billions of dollars injected in the country's economy by the Federal Reserve. This provokes an increase in prices for many categories of goods and services. Experts believe that it is the housing market that can now push the consumer price index up. Thus, the upcoming inflation report is expected to clarify the situation. If inflation starts to decline, the Fed will hardly rush to wind down its quantitative easing program. If inflation continues to rise, the regulator is highly likely to decrease its cash injections into the economy.
