The market generally expects the Fed to announce a reduction in asset purchases at the end of the policy meeting on Wednesday, and Jerome Powell may say that this is not a step towards raising interest rates in the short term. After the two-day policy meeting, the Federal Open Market Committee will almost certainly keep interest rates unchanged at around zero, and announced that the monthly bond purchases will be reduced by 15 billion U.S. dollars from the current 120 billion U.S. dollars. It is judged that as the economy recovers from the epidemic, The code reduction conditions have been reached.

The committee will issue a statement at 2 pm Washington time. There is no quarterly forecast for this meeting, and Powell will hold a press conference 30 minutes after issuing the statement. Although acknowledging that inflation has lasted longer than expected, Powell said on October 22 that as the economy reopens, his baseline expectation is still that price pressures will ease. "I do think it's time to cut down, but I don't think it's time to raise interest rates," he said. Although investors predict that there will be more than two interest rate hikes before the beginning of 2023, Fed officials have stated that they will not consider raising interest rates until the end of the bond purchase program.

The yield curve of U.S. Treasury bonds has steepened. Previously, Fed Chairman Powell emphasized that underweight bond purchases do not mean an imminent interest rate hike. He said that Fed officials will remain patient with tightening policies, but if the level of inflation gives the Fed a reason to act, the Fed will not hesitate. Principal Global Investors chief strategist Seema Shah wrote that Powell is very careful today and has always insisted that the Fed’s focus is to reduce the size rather than raise interest rates. This is regrettable because the market only wants to talk about raising interest rates.

Traders' expectations on the timing of the Fed's rate hike remain basically unchanged. Money market derivatives show that the Fed will raise interest rates by about 55 basis points by the end of 2022. Overnight index swaps show that the first rate hike is around July, and the probability of a one month rate hike in advance is about 70%.

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