Fed monitor: Review - It is not the time to start talking about tapering“

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.

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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