Trading conditions in the $22 trillion U.S. government bond market have worsened ahead of the summit with a lack of liquidity and widening bid-ask spreads setting the stage for savage price swings. Powell’s peroration could escalate or assuage fears of impending calamity.
Another item likely to be high on the agenda concerns the Fed’s $120bn monthly asset purchases. Last year, amid a series of economy-rocking lockdowns, the Fed pledged to continue buying up bonds until the economy reached full employment and price stability goals were met. Senior Federal Reserve official Eric Rosengren recently said he hoped the bank would wind down its monthly asset purchases this autumn and get on track to stop them altogether by the middle of next year. We shall see.