Asia Wrap: It’s Too Quite On The Macro Front

Potential Volatility Ahead: Reflections on the US Economy’s Quiet Week

It’s been relatively quiet for the world’s largest economy in terms of scheduled events.

With the exception of Nvidia‘s earnings release later and the January FOMC minutes, there are a few notable events on the calendar.

However, it’s worth noting that quiet weeks in terms of scheduled events can sometimes surprise you with unexpected developments and volatility.

The account of the Fed’s January policy meeting will be put into context by the recent overshoots on both consumer and producer prices in last week’s round of US data. The minutes are likely considered too outdated to have a significant impact. When Powell spoke to reporters late last month, a March rate cut was still a possibility, at least in the market’s view. However, the situation has changed since then, and there is now no chance of a rate cut next month. Therefore, any discussion of a potential rate cut in the minutes would be redundant.

Fed’s Tapering Plans: Insights from Upcoming Minutes

The Federal Reserve is lagging behind in communicating its plans for tapering quantitative tightening (QT), despite Lorie Logan’s initial efforts in early January. The upcoming minutes might shed some light on when the discussion about tapering will truly begin, although it’s doubtful traders will gain much new information.

There was a preliminary discussion about reducing the pace of balance sheet runoff in January, and this discussion is expected to become more serious next month. With overnight reverse repurchase agreement (RRP) balances falling below $500 billion, I believe the Committee should announce the parameters and timetable for tapering in March rather than waiting until May.