Today’s FOMC meeting remains a key focus. We do not expect the Fed to change its policy settings at this meeting (7pm BST). We expect the Fed to taper its asset purchases in December. The main interest will be on Chairman Ben Bernanke’s press conference for any signals about future Fed policy (7.30pm BST). We expect Bernanke to reiterate his 22 May conditional outlook, i.e. the Fed could “consider” a tapering of asset purchases over coming meetings if the US economy continues to improve and the Fed is confident it will be sustained. The decision to taper asset purchases is dependent on the outlook for the US labour market. Bernanke could provide clarity by elaborating what influences Fed thinking for the outlook for the US labour market. Recent moves in US bond yields suggest tapering expectations remain firm.
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Commonwealth Bank