The Federal Reserve is expected to take its first major step away from the easy policy it put in place to fight the pandemic, a milestone on the road back toward normal.

The Fed’s two-day meeting Tuesday and Wednesday is the big event for markets in the week ahead. The central bank is widely expected to announce that it will begin to unwind its $120 billion in monthly bond purchases and end the program entirely by the middle of next year.

Economic data will also be important, with the October jobs report on Friday. There are dozens of earnings expected, including pharmaceuticals like Pfizer and Moderna, as well as a host of travel, energy, insurance, and tech companies.

The Bank of England also meets Thursday, and it is expected to raise interest rates. The move comes after rate hikes by South Korea, Norway and others.

“The Fed is part of a global move to remove accommodation, and the market drives right past that,” Bleakley Advisory Group CIO Peter Boockvar said. “In a way, the stock market is playing a game of chicken, with this inflation move and interest rates and the response from central banks.”

Inflation has been running at a 30-year high. Core PCE inflation — which is the Fed’s preferred gauge —jumped 3.6% in September on a year-over-year basis, the same as in August.

Stocks were higher on the week, with the S&P 500 up about 1.1% as of Friday afternoon and up roughly 6.7% for the month of October. Both the Dow and S&P 500 notched new highs in the past week. The widely watched 10-year Treasury yield was at 1.53% Friday afternoon.

“There is an incredible level of complacency out there in this environment,” Boockvar said.

Other events the markets are monitoring include the gathering of world leaders at the G-20 in Italy and the United Nations climate summit COP26, beginning Sunday in Scotland.

“You’re going to have a wild week,” Wells Fargo’s Michael Schumacher said. He noted that the Fed’s action will dominate the week, and the jobs report will be secondary.

Wells Fargo economists expect 390,000 jobs were added in October and average hourly earnings grew by 0.4%, he noted. Payrolls were up just 194,000 in September. Schumacher said inflation is the biggest concern in the markets, so the wage data will be most closely watched.

Schumacher said the market is widely expecting the Fed to announce it will reduce its bond purchases by $15 billion a month, starting either in November or December. The central bank implemented its $120 billion monthly bond-buying program in early 2020, as it slashed rates and introduced programs to buy a range of assets to help keep the markets liquid.

Now, as the program is being wound down, it is what Fed Chairman Jerome Powell says about inflation that matters most because that will drive interest rate expectations.

Yet, Powell is expected to stress that the Fed is not automatically going to raise interest rates once the bond purchases end in the middle of next year. Traders are pricing in as many as three interest rate hikes next year, but in the latest Fed forecast, only half of central bank officials agreed there should be even one.

“The inflation commentary is a lot more important,” Schumacher said. “Powell has sounded concerned about expectations getting baked in.” He noted that the 2-year yield, which most reflects the Fed, has risen more than 30 basis points since the last Fed meeting five weeks ago.

Schumacher said market expectations for rate hikes may be overdone, and that he does not expect a move until the beginning of 2023. “The direction is right, but the speed is wrong,” he said.

Powell’s comments will be closely watched for any adjustment in his thinking on inflation. The Fed had described the surge in rates as “transitory” or temporary. The consumer price index has been running above 5%, and core CPI was at 4% in September.

“The general feeling among central bankers and the major central banks is this inflation rate will come back down,” TIAA Bank president of world markets Chris Gaffney said. “Nobody is using ‘transitory’ anymore, but they don’t feel like we’re going to have prolonged high inflation.”

Gaffney said the weaker-than-expected 2% growth in third-quarter gross domestic product could help the Fed convince the markets that it intends to keep rates lower for longer.

“As long as they stay accommodative, I think the recovery continues,” he said. “I’m fairly bullish for the markets going forward. We’ll certainly see a lot more choppiness, but I still think the global economy, the U.S. economy particularly, is right now a great environment for corporations. We’re seeing fairly positive earnings reports, and more importantly expectations for future earnings.”

There have been some high-profile misses, including both Apple and Amazon this past week. Both their stocks fell, weighing on the Nasdaq down Friday.

“Earnings overall have been good, but there’s still a lot of profit margin challenges out there,” Boockvar said. “There’s no better example than Apple and Amazon.”

Monday

Earnings: ZoomInfo, Avis Budget, Ryanair, Lowes, PG&E, Cirrus Logic, NXP Semiconductor, Public Storage, Rambus, Chegg, Tanger Factory Outlet, Transocean

9:45 a.m. Manufacturing PMI

10:00 a.m. ISM manufacturing

10:00 a.m. Construction spending

Tuesday

Monthly vehicle sales

FOMC begins two-day meeting

Earnings: Pfizer, Amgen, BP, DuPont, ConocoPhillips, Under Armour, KKR, Ralph Lauren, Martin Marietta Materials, Estee Lauder, Marathon Petroleum, Eaton, Cummins, Bausch Health, Akamai, Denny’s Devon Energy, Caesars Entertainment, Match Group, Zillow, Assurant, Prudential Financial, Perkin Elmer

Wednesday

Earnings: Qualcomm, CVS Health, Humana, Marriott, Etsy, Electronic Arts, Booking Holdings, Take-Two Interactive, Fox Corp, Roku, MGM Resorts, Allstate, Virtu Financial, Exelon, Wingstop, BorgWarner, Brinker International, Pitney Bowes, Scotts Miracle-Gro, Steve Madden, Cabot Oil, Cheesecake Factory, Pioneer Natural, Hyatt Hotels, CF Industries

8:15 a.m. ADP

9:45 a.m. Services PMI

10:00 a.m. ISM services

10:00 a.m. Factory orders

2:00 p.m. Fed statement

2:30 p.m. Fed Chairman Jerome Powell briefing

Thursday

Earnings: AIG, Moderna, Regeneron, Pinterest, ViacomCBS, Dropbox, First Solar, Expedia, Airbnb, Shake Shack, Uber, Square, Toyota, Kellogg, Credit Suisse, Cigna, ING, Southern Co, Air Products, Hanesbrands, Barrick Gold, Citrix, CyberArk, Duke Energy, Wayfair, Planet Fitness, Sprouts Farmers Market, Allscripts, JDS Uniphase, Datadog, Cushman and Wakefield, Illumina, Occidental Petroleum, Skyworks Solutions

8:30 a.m. Initial jobless claims

8:30 a.m. International trade

8:30 a.m. Productivity and costs

Friday

Earnings: DraftKings, AMC Networks, Canopy Growth, Gannett, Johnson Controls, Sempra Energy, Groupon, Elanco Animal Health, Goodyear Tire, Cinemark, Embraer

8:30 a.m. Employment

10:00 a.m. Consumer credit

Saturday

Earnings: Berkshire Hathaway