The stock markets and Bitcoin’s price performance might be hitting a bumpier road after the next Consumer Price Index release. During the year the Fed has been clear about an upcoming tapering, and now that new –and higher– CPI metrics are expected, the taper is likely to fasten its pace and the markets to suffer.
The central bank is expected to start reducing its net asset purchase month by month by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. This has raised fear over the traditional and crypto markets as prices are expected to be affected by a reduction in the global market’s liquidity. Previous tapering scenarios have seen yields fall and government bond prices rise.
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Costumers who have experienced the rise in prices this year have low expectations for the Consumer Price Index’s results to come. The red signals send a reminder of Jerome Powell’s previous words: “we are prepared to adjust the pace of purchases if warranted by changes in the economic outlook,”
Similarly, James Bullard, President of Federal Reserve Bank of St. Louis, had said in an interview with Bloomberg that they could “move faster” and speed of the taper “if it is appropriate”.
I think it behooves the committee to go in a more hawkish…