In the context of sustained global inflationary pressures, investors continue to pay attention to what measures central banks in various countries will take to respond. Following the announcement of interest rate decisions and monetary policy by the central banks of Europe, Canada, and Japan last week, the Federal Reserve and other central banks will also announce interest rate decisions this week. In addition, Friday's October US non farm data also attracted high attention from investors. The market expects that the Federal Reserve may announce a reduction in bond purchases this week.

Is the FOMC meeting approaching, shrinking or has it entered the countdown?

This week, the United States will release multiple heavyweight news, among which the FOMC's interest rate resolution is even more important than the October non farm report.

On Wednesday (3rd) Eastern Time, the Federal Reserve will hold a new round of monetary policy meetings and announce interest rate decisions on Thursday (4th). The market generally expects the Federal Reserve to make a decision to scale back. Powell also revealed that the Federal Reserve may announce a reduction in bond purchases as early as November.

Looking back on Powell's earlier speech, he stated that the United States has made sufficient progress in economic recovery and the labor market. The market believes that the two reports in August and September are sufficient to drive the Federal Reserve's reduction plan, while the importance of the October non farm report is relatively low.

As for the starting point of reduction, the current market forecast has not yet reached consensus. Morgan Stanley expects the Federal Reserve to officially acknowledge that inflation is taking longer than expected on November 15th and announce the start of a reduction in bond purchases. Some analysts also believe that the time point for starting the reduction may be in the middle of December, and it will be implemented at the speed of $10 billion of treasury bond and $5 billion of MBS per month until the end of June next year.

However, even if the reduction is announced, it seems that the Federal Reserve has not yet reached a consensus on the timing and decision of interest rate hikes. According to earlier speeches by Federal Reserve officials, some are in favor of raising interest rates for the first time next year, but Powell stated that the Federal Reserve has another set of standards for raising interest rates and that there is still a "long way to go".

On the market side, according to CME's FedWatch tool, traders have recently been more proactive in pricing the Federal Reserve's interest rates. From the perspective of futures contracts, the Federal Reserve will raise interest rates by at least 50 basis points in 2022, with a 50% chance of another rate hike in December.

Tim Duy, Chief US Economist at SGH Macro Advisors, predicts that the Federal Reserve will raise interest rates as early as the third quarter of 2022.

In addition, although the October non farm data may no longer affect the Fed's decision to cut, there may still be clues to the Fed's interest rate hike. Some analysts believe that if the October non farm employment data is strong, it may make the Federal Reserve believe that the labor market has reached its target earlier and raise interest rates earlier.

At present, analysis predicts that the US non farm data for October will increase by 413000 people, compared to the previous value of only 194000 people.

Australia and the Bank of England have successively issued interest rate resolutions

On Tuesday (2nd), the Federal Reserve of Australia will announce its interest rate decision. Bloomberg economist James McIntyre said that this may be the first to affect market decisions.

David Plank, head of economics of ANZ Bank, said earlier that it was expected that in the monetary policy released by the Federal Reserve of Australia next week, the problem of high inflation would continue until the end of 2023, and announced at the meeting that he would abandon the target of 0.1% yield of treasury bond due in April 2024.

On Thursday (4th), the Bank of England will release interest rate resolutions, meeting minutes, and monetary policy reports. The Bank of England hinted at raising interest rates in mid October.

Barclays Bank of England also stated in its report that it is currently possible to exclude the Bank of England from raising interest rates in November, and expects the Bank of England Monetary Policy Committee (MPC) to raise interest rates in December.

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