Financial markets everywhere will be watching closely as the U.S. Federal Reserve meets today & tomorrow. The Fed, short for Federal Reserve, is expected to announce tapering. To recap, tapering is the process of reducing the rate at which central banks buy new assets (usually government bonds).
Who is affected🤷 The Fed has been buying $120 billion in bonds every month to keep financial markets stable & support the economy as it recovers from the pandemic. Now, it plans to slow buying by $15 billion per month, but it’s also expected to stress that the pace of tapering is flexible & depends on the economic outlook. Tapering mainly impacts debt markets, but it also has ripple effects on U.S. and emerging stock markets.
Why is this important🤔 The scare here is a potential taper tantrum, like in 2013 when uncertainty over tapering’s timing & pace shook global financial markets. The Fed has been keen on avoiding a 2013 repeat by providing clear & transparent updates on its tapering plans.