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Deutsche: Talking About How To Talk About Tapering

FED

Deutsche expects the highlight of the June FOMC meeting to be "a status check on the Committee's tapering deliberations."

  • Median funds dot unchanged for 2023 hike (in a "close call"). GDP in 2021 up sharply (6.9%), unemp rate down to 4.4%; core PCE up to 2.9%. Only modest change lower to 2022 growth, 2023 unchanged; unemp and inflation unchanged 2022-23.
  • Powell to indicate that the FOMC discussed what economic conditions they would like to see to begin tapering; likely to indicate that FOMC believes it will take some time for "substantial further progress"; and that all agreed it was not yet time to taper.
  • Powell to repeat bottlenecks narrative on inflation, but "is also likely to note that there is a lot of uncertainty about how long it will take for these bottlenecks to be resolved and for price pressures to moderate".
  • Administered rates: No change; Powell to note that will make as needed in future to ensure that the Funds rate remains within the target range, and in any case would be technical in nature.
  • Deutsche also sees an "outside chance" of an announcement on a standing repo facility.


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