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The pressure is mounting on the Federal Reserve – but what, if any, action will take they on Wednesday?

US: When will the Fed start tapering stimulus?

Last week’s inflation data has pushed the central bank closer to the precipice of a shift in monetary policy.

The standard reading for May came in at 0.6% month-on-month, while hitting 5.0% year-on-year – the highest level since 2008. The core figures were just as alarming, with a month-on-month reading of 0.7%, and a yearly reading of 3.8%, a level last seen in 1992.

Countering these eyebrow-raising CPI figures, however, is an unperforming labour market. Though the jobless claims reading is now regularly hitting pandemic-lows, the headline nonfarm number has repeatedly failed to match estimates across the last few months. This is important, as one of the requirements for Jerome Powell to consider tapering the Fed’s current stimulus programme is a ‘string’ of strong jobs reports.

The inflation situation is likely going to outweigh the labour landscape and may prompt a shift in language on Wednesday evening. It all depends on whether the Fed is going to stick by its believe that this spike in inflation is transitory and is a tolerable by-product of the reopening economy.


The rate vote and Fed statement is also going to be accompanied by the latest economic projections for the US, further complicating the latter half of the week.

Before the Fed get-together there’s a good whack of data on Tuesday, with the retail sales, PPI, Empire State manufacturing index and industrial production figures.

The other side of the Fed, meanwhile, there is the Philly Fed manufacturing index and usual jobless claims number on Thursday.

UK

While not as high-profile as the goings on in the States, the UK markets have their own gauntlet to run this week.

Hopes will be for a further reduction in the unemployment rate, and another negative claimant count change reading on Tuesday.

Wednesday then has the UK’s own inflation reading, following the 1.5% posted the month prior.

Finally, Friday wraps the week up with the retail sales data for May, following the unexpected 9.2% increase in April.

Eurozone

Over in the Eurozone you’ve got region-wide industrial production on Monday, German and French inflation on Tuesday, region-wide inflation on Thursday, and the current account number on Friday.

This article is brought to you in association with Spreadex. All opinions expressed in this article are from the author and do not necessarily represent the opinions of The Armchair Trader. You can find out more about Spreadex products and services here, or find more articles from Connor Campbell here.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Connor Campbell

Connor Campbell

Connor joined Spreadex in 2014 as part of a newly expanded financial analyst team after graduating from the University of Southampton with an MA in English. His focus is on providing Spreadex's customers with up-to-date and informative news, and is responsible for the market analysis found on the Spreadex website.

Connor produces three daily market updates, a daily stock earnings preview, a weekly financial market preview piece every Friday, a round-up of all the big financial stories making the weekend press every Monday morning and regular stock market features.

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