The long-awaited Fed's Jackson Hole speech by Jerome Powell has just ended and the markets have reacted.
Why did this speech matter?
Although all public appearances by Fed Chairman Jerome Powell are notable, today's speech was on high-importance events.
Investors expected to hear the Fed's hints on when they will begin to stop (taper) their “money printer” – a $120 billion a month bond-buying scheme implemented to rescue the economy from the Covid-19 pandemic. As some market experts have noted, “Implementing this monetary policy was tough enough, getting out will be no treat, either”.
What happened during the speech?
Jerome Powell said he supports starting to taper Fed’s bond purchases this year. However, Powell put off hinting at the date of beginning of the tapering. “Today, with substantial slack remaining in the labor market and the pandemic continuing, such a mistake could be particularly harmful,” said Powell regarding tapering too soon.
What happens next?
As approved by Powell, the tapering is inevitable in 2021, therefore investors will likely continue to hold onto their long-positions for a while until any hint of tapering is revealed by the Fed. However, beware of the September Effect and its likelihood of happening, especially in unique times like these.
P.S. If you traded during today's speech, share your results with the community! 🙌
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