The Federal Reserve is anticipated to release some statements for the bond market on Wednesday

After witnessing some turbulence in the Monday’s market, the Federal Reserve’s challenge is expected to be to soothe and reassure investors while acknowledging that they are prepared to take first major step away from easing policies it had put as a benefit amid the pandemic. The Fed is anticipated to release a statement along with other economic and interest rate forecasts that the bank issues every quarter. The central bank is anticipated to suggest that they are growing ready to announce that the Fed may start pushing back its USD 120 billion invested in monthly purchases across mortgage-backed and Treasurys securities.

The Fed’s meeting that began Tuesday, which was followed by a turbulent day in global markets due to growing concerns over China’s property developer Evergrande, suggest that the impact may be felt even outside China’s borders. The S&P 500 registered its worst day since the month of May. Although stocks got stabilized a bit Tuesday, as investors were looking into the actions undertaken by the Chinese government for containing the situation. One of analysts have stated that the Fed may cut back the bond purchases at USD 10 billion Treasurys and USD 5 billion mortgage-backed securities per month.

Although the Fed’s latest move initiated to get away from asset purchases may get well broadcasted, some strategists have been stating that the interest rate forecast may come as a wild card for the markets. However, one must also have to consider the Fed’s expectations for the inflation rates. In the month of June, the Fed made a forecast of 3.4% for the personal consumption expenditures inflation, before registering a fall to 2.1% in 2022. Also in the June forecast, many Fed officials have targeted the first two major increases to the funds target rates for the year 2023, but there’s a growing risk that could change the same.