Fed seen speeding taper of MBS in early-2022 scale back – Bloomberg survey

The latest Bloomberg survey of 51 economists showed on Friday that the US Federal Reserve (Fed) is likely to quicken the pace of tapering mortgage-backed securities (MBS) when it begins scaling asset purchases in early 2022.

Key findings

“Three-quarters of economists expect either an early signal at the Kansas City Fed’s Aug. 26-28 policy retreat in Jackson Hole, Wyoming, where Powell is likely to speak, or at the Sept. 21-22 FOMC meeting, when the committee updates its quarterly forecasts.”

“That is likely to be followed by a formal announcement of tapering in December, in the view of nearly half of those surveyed, and actual reductions starting in the first quarter of 2022, according to 71% of the economists.”

“8% said the Fed will start with an MBS only tapering, while 46% said the reductions will be in equal amounts, effectively ending mortgage purchases long before Treasuries. “

“Another 46% say the reductions should be proportional to the buying.”

“More than half of the economists expect tapering to last 10 to 12 months, which would wrap it up before the end of 2022 if it starts early in the first quarter.”

“Three quarters of economists say the risks on inflation are to the upside compared to FOMC forecasts, which is the biggest concern they have in looking at economic risks.”

“A large majority of them continue to expect President Joe Biden will renominate Powell as chair.”