UNITED STATES   The September FOMC meetings is the main event this week. It will be a turning point in several dimensions. First, we—and the entire market—expect the announcement of balance sheet reduction; the start of the process of unwinding the Fed’s $4.5trn holdings of Treasury and mortgage-backed (MBS) securities. The question is for when? Possibly, as soon as next month; most certainly, by early 2018. Second, it will be the last meeting of the Vice-Chair, Stanley Fischer. Fischer’s departure will leave the FOMC without one of its most astute and informed inflation watchers, and theoreticians. Moreover, and third, although this will not be Janet Yellen’s last meeting, it could be her last conference, pending the announcement of a new Fed head. Because the FOMC took great pains to inform the market, including about the operational details, and because financial conditions have been loosening almost steadily since end-2015, there is absolutely no expectation of a “taper tantrum.” Nevertheless, the whole point of “normalization” is to redress in part the flatness of the yield curve. Strategists expect that the announcement will lift 10-year Treasury yields via the term premium and put modest downward pressure on equity valuations. The Fed will start with … Continue reading US + Brazil Financial News (9/18)