Today’s FOMC meeting will be all about tapering. Powell & Co will surprise no one when they formally announce the tapering of bond purchases, which are still running at a pandemic emergency pace of USD120 billion a month. In all likelihood, the Fed will actually start tapering bond purchases as soon as next week.

As we mentioned in Monday’s Comment, everybody has been doing back-of-the envelope calculations on the pace of tapering. Because that’s all there is to it. For example, cutting monthly bond purchase volumes by USD20 billion every month would mean QE will end in March 2022. That would be the hawkish outcome. USD15 billion a month and we’re looking at a May end date, which we see as the middle-of-the road option. The Fed has guided for a mid-2022 end to QE (so, slightly slower tapering and ceasing QE in June/July). But that looks old hat these days.


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