The Federal Reserve is expected to send a message to the public on Wednesday, and most believe the message will be a simple one –however, many believe it could still cause a big response in the markets. The entire market is revolving around whether or not the tapering of the bond buying program will indeed begin in September.
As the Federal Reserve members have differing opinions, so do the analysts on Wall Street. Everyone is divided about what the tone will be in the minutes of the Federal Reserve’s August meeting, which will be released at 2 p.m. Eastern time on Wednesday. The last few months have focused on the scaling back of the bond buying program, which is the stimulus program in which the Federal Reserve purchases $85 billion in bonds each month. The program has been designed to keep interest rates down.
The anticipation is that when the program officially starts scaling back, interest rates will be driven higher. In the meantime, those higher yields have weighed on stocks, and now the stock traders are nervous. Some experts are anticipating that the bond purchases will begin slowing down by the Federal Reserve’s September meeting, but others are in disagreement. The sell-off of the bond market has sent 10-year yields as high as 2.9 percent this week alone. On Tuesday, the 10-year was at 2.82 percent. Stocks were mixed after four days of losses.
Minutes are being released just a day before the Federal Reserve’s annual symposium is set to begin in Jackson Hole, Wyo. Federal Reserve Chairman Ben Bernanke won’t be attending the conference, which is a break with tradition. However, with him not attending, there are no expectations for a major new policy message from the Federal Reserve. The symposium will be attended by several regional Federal Reserve presidents and officials, including Vice Chair Janet Yellen.
Yellen is the leading internal candidate to replace Bernanke when his term ends in December, but she is not an automatic appointment since former Treasury Secretary Larry Summers has emerged as a candidate for the role. She is attending the symposium, but is not slated as a keynote speaker.
Watchers are in disagreement as to how much information will provided in the minutes that are to be released today. They do believe it will be clear that the Federal Reserve officials are not in agreement on how and when they should start pulling back on the bond buying. Some believe it will be October before the Federal Reserve makes an announcement of a slowdown, since the Oct. 30 meeting date is the same day the third quarter GDP will be released.
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