According to ING's economists, while no Federal Reserve policy changes are expected in July's meeting, we could hear more about the tapering discussions that started in June.

"We are building up to the 28 July Federal Reserve meeting, but Chair Jerome Powell made it clear in his recent testimony to Congress that he continues to believe inflation pressures are largely transitory and there isn’t any pressing need to signal an imminent shift in policy. After all, employment levels remain more than 6 million lower than before the pandemic started while the latest Covid wave adds another level of uncertainty that can be used to justify inaction."

"Remember too that the Fed’s new monetary framework places a much greater emphasis on ensuring as many people in society feel the benefits of growth. This was accompanied by a move to an “average” inflation target of 2% and a clear signal that the economy will be allowed to run hotter than in previous cycles to ensure these targets are reached."

"Given this backdrop we are not expecting any change to the Fed funds target rate range of 0-0.25%, nor do we expect the Fed to lower its monthly QE asset purchases, which are currently running at $120bn per month."

"Nonetheless, there is a growing hawkishness creeping into the viewpoints expressed by other FOMC members given the strong economy and the fact that inflation is running at more than double its 2% target."

"While the July FOMC meeting is likely to be a non-event in itself, we wouldn’t be surprised to hear Jerome Powell talk a little bit more about the discussions surrounding the path of tapering. The upcoming Jackson Hole Federal Reserve Conference in late August, we suspect, will see Fed officials starting to lay the groundwork for a QE taper with this fleshed out in more detail at the September FOMC meeting before being formally announced in December. We predict a relatively swift reduction that sees QE purchases end in the second quarter of 2022."