Citi: Fed Messaging Poses Risk Of Earlier And Faster Taper

Citi saw the June FOMC as hawkish per their expectations, with new forecasts justifying a hawkish dot shift

• They saw the taper timeline as little changed (with a hint coming as early as July or Jackson Hole, w actual taper 4Q or 1Q 2022), but the language used at the meeting "does pose some risk of a slightly earlier and potentially faster pace of tapering once it occurs".
• Powell sounded upbeat, noting upward price pressure from a rebound in spending and possibility that inflation could turn out higher than expected. This puts more weight on incoming inflation data.
• Powell repeatedly noted we are likely to see strong job creation through summer/into fall, with a "very very strong" labor market 1-2 years out. He noted himself that the conditions for hikes will likely now be met sooner than expected.
• The only dovish language was Powell downplaying the dots.