The conclusion of the two-day meeting of the US Federal reserve is unlikely to bring any surprises. The probability of interest rates being maintained at their current levels is very high.
Nevertheless, there’s a high probability of a fundamental long-term decision being made, which will have a substantial impact of global stocks and currency markets. The Fed will most likely announce plans to reduce their balance sheet today.
The Fed’s portfolio of government securities is valued at 4.5 trillion USD. According to previously published information, the Fed was planning to reduce its purchasing of Treasury bonds by a maximum of 10bn USD a month. This limit was later increased to 50bn USD. The Fed hopes to get the balance sheet down to 3 trillion USD.
Naturally, the Fed will continue on their trajectory of rate hikes, and we could see the next one as early as December. A moderate tightening of monetary policy from the Fed is hardly likely to lead to a liquidity crisis on the market.
There’s no point waiting for a correction on the US stock market. Nor should we expect one on the US dollar, which will continue its steady decline against the euro.