FOMC Minutes: Too early to talk about tapering – UOB

Senior Economist at UOB Group Alvin Liew evaluates the latest publication of the FOMC Minutes of the January meeting.

Key Quotes

“The main takeaway from the Federal Reserve’s release of the January 2021 FOMC minutes (18 Feb) was the central bank’s reassurance that the Fed is keeping its easy monetary policies in place for some time.”

“While the FOMC participants broadly agreed that the medium-term outlook for US real GDP growth and employment had improved, they continued to see the uncertainty surrounding that outlook as elevated and that the progress on vaccinations was essential for supporting further gains in consumer spending and economic recovery more generally.”

“With the expectations that it would be “some time” before conditions to scale back their massive bond purchases were met, the latest FOMC minutes left markets wondering whether any tapering could start before 2022. Going forward, our base case remains for the Fed to stay on hold for most of 2021, at least and the taper discussion will only start in late 2021/early 2022. This is premised on the continued successful rollout of vaccinations across the US, more fiscal stimulus in the coming months, and the subsequent reduction in COVID-19 infections and deaths. We continue to hold the view that the Fed will keep policy rates at the current 0.0-0.25% region at least until 2023.”