Barclays: A Strange Twist Of FAIT

A more hawkish meeting than anticipated has led Barclays to expect an early start to tapering than previously forecast.

• Further, Barclays sees credibility issues arising from the FOMC's communications: "a lack of credibility in current tapering guidance that is underscored by the fact the committee says it has not seen enough to talk publicly about tapering at the same time the median member has penciled in two hikes in 2023…[and] we have concerns that a change in messaging following stronger-than-expected inflation outturns during re-opening could lead markets to question the Fed's commitment to its new framework"
• "A wholesale revision in the dots for virtually the same inflation trajectory speaks to more than simply risks around the baseline outlook."
• Indeed, Barclays notes that perhaps the FOMC sees fewer concerns about structurally low inflation going forward, than it did when it underwent the framework review.
• Future action: Barclays now expect a taper formally announced in September and to begin in November (prior: Nov announce, Jan 2022 start).