Moody’s: Faster taper would give the Fed the flexibility to begin raising rates anytime in H2 2022

Anil Panchal FXStreet

Global rating agency Moody’s highlights the delicate decision the US Federal Reserve (Fed) will have to make during Wednesday’s monetary policy meeting.

The rating giant initially states, “If the market perceives that the Fed is behind the curve in controlling inflation, it would lead to higher inflation expectations and long-term interest rates, potentially weakening the dollar and affecting asset values.” Before mentioning that while, on the other hand, if the Fed overreacts to inflation, ‘it could result in tightening monetary policy too much, in turn dampening economic growth.’

Additional key quotes

Even if the FOMC were to announce a quickening taper and an earlier end to bond purchases, the committee will likely stress data dependency with regards to the timing and pace of rate increases.

If the Fed announces faster tapering to end the bond purchase program, possibly by March 2022, it would more strongly signal that monetary policy is turning.

A faster taper would give the Fed the flexibility to begin raising rates anytime in the second half of 2022.

Read: Fed Preview: Dollar hinges on 2022 rate hike dots, guide to trading the grand finale of 2021

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

AUD/USD eyes 0.7150 barrier nine-day EMA

AUD/USD inches higher after registering modest losses in the previous day, trading around 0.7130 during the Asian hours. The technical analysis of the daily chart indicates that the pair is moving sideways within the rectangle pattern, suggesting a consolidation as neither the bulls nor the bears have enough momentum to take control of the market.

USD/JPY trades below 160.00 intervention threshold; bullish bias intact

The USD/JPY pair attracts some sellers during the Asian session amid fears that authorities will step in again to prop up the Japanese Yen. Furthermore, the Israel-Lebanon truce prompts some profit-taking around the US Dollar and exerts downward pressure on the currency pair.

Gold extends rebound to $4,500 as US yields edge lower

Gold (XAU/USD) preserves its recovery momentum following Wednesday's slide and tests the $4,500 mark in the second half of the day on Thursday. While US-Iran uncertainty remains, easing tensions between Lebanon on Israel seems to be helping the market mood improve, causing the USD to lose strength alongside falling US T-bond yields and opening the door for a decisive rebound in XAU/USD.

Bitcoin’s massive storm is back: Why the sell-off is far from over

Bitcoin price action over the last few weeks has felt less like a normal, healthy correction and more like a slow grinding crash that continues to wreak havoc on holdings and trading accounts. And everything suggests that the dramatic crash isn’t over.

Nonfarm payrolls: Testing the limits of Fed policy patience

The upcoming nonfarm payrolls report for May will provide the final update on the US labor market before Kevin Warsh attends his first policy meeting as the new Fed Chair later this month.

Recession on paper: What really moves the Canadian Loonie now?

Statistics Canada handed the headline writers a gift and the analysts a headache. Real GDP shrank 0.1% on an annualized basis in the first quarter, and with the fourth quarter of 2025 revised down to a 1.0% contraction, that is two negative quarters in a row, the textbook definition of a technical recession and Canada's first since the pandemic.