The Fed has had its fair share of challenges in recent weeks, from two key resignations to an inflation story that refuses to go away. Coming into today's FOMC meeting, the expectations of market participants were pretty clear - that the Fed would start to trim back (taper) its purchases of bonds in the secondary market before the end of the year, and to lay out improved guidance as to when interest rates would start to advance. 

At $120 billion per month, it is clear that quantitative easing needs to be paired back, given that the US economy has been growing and with inflation pressures persisting. To no surprise, the key interest rate range was left unchanged from 0 to 0.25% and markets received their confirmation that the taper would begin this month. November will see a $15 billion taper, consisting of $10 billion in treasuries and $5 billion in agency mortgage-back securities and the Fed expressed its preparedness to adjust the reduction in asset purchased with changing economic data. Markets turned positive on the news, which may be partially due to the size of the taper not being as large as expected and the continued inclusion of the transitory nature of inflation pressures. 

Supply chain bottlenecks continue to put pressure on a wide range of industry participants and the resulting supply and demand imbalances remain a key risk to the economic outlook. The jury is mixed on whether these elevated inflation pressures will indeed be transitory and all eyes including, the Fed, will be on PPI and CPI data released next week.