Danske Research Team
Danske Bank A/S
Key takeaways
- As expected, the Fed kept monetary policy and policy signals unchanged. Interim meeting so there were no new forecasts or 'dots'.
- Most importantly, Fed chair Powell said that "It is not the time to start talking about tapering", highlighting what we wrote in our preview: The Fed is outcome-based, not forecast-based.
- The Fed is more upbeat on the economy, downgraded the risk outlook to "risks remain" (from "considerable risks") and says higher inflation is mostly due to "transitory effects".
- Based on our very positive US macro outlook, we continue to see the Fed moving in a more hawkish direction later this year when more positive US macro data start to arrive. Our base case is September. We still think actual tapering will start in January 2022.
- We still see US rates to move higher later in the year. Dovish fed fuels further reflation trading and the dollar will remain on weak footing near-term.
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