Markets on edge as US Fed meets to tackle high inflation - afp.com

The US Federal Reserve begins a two-day policy meeting with investors focused on how aggressively it plans to tighten monetary policy in response to elevated inflation. The Fed's decisions carry weight well beyond US borders: its rate path influences global borrowing costs, the dollar, and capital flows into emerging markets, which is why equities, bonds, and currencies have shown caution in the run-up to the meeting.

The central question is how the Fed balances two risks. Moving too slowly could allow inflation expectations to become entrenched; moving too quickly could weigh on growth and employment. Markets will parse the policy statement and any guidance on the pace of future rate increases and balance-sheet reduction for signals about which concern is currently dominant.

What to watch: the size of any rate change, the tone of the statement, and the chair's press conference. The Fed's framing of inflation and growth will likely shape market direction in the sessions that follow.