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Investors prepare for volatility amid expectations of stimulus collapse


June, 17 2021
watermark Economic news

The Federal Reserve is starting to talk about curtailing super-soft monetary policy, which may cause high volatility in the near future.


The first increase in the Fed's interest rate is possible in 2023, and not in 2024, as previously predicted. Moreover, the regulator has begun debates about when and how it would be appropriate to start scrapping the massive $120 billion a month bond buying program.


Previously, it was planned that the program will continue until significant progress is made in the recovery of the labor market and in bringing inflation closer to the target level of 2%. And according to forecasts, inflation will well exceed the regulator's target, accelerating to 3.5% this year.


The question of when exactly the Fed will roll back stimulus has had a huge impact on financial markets: stocks have declined, the dollar has jumped to two-month highs, and the yield on 10-year Treasury bonds has surged.


Experts note that the current situation is reminiscent of 2013, when the Fed unexpectedly for everyone put forward the idea of ​​gradually winding up the quantitative easing program. Bond yields rose sharply then, and the underlying 10-year yield jumped from an approximate 2% in May to 3% in early September.


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