Goldman Sachs: Too Soon To Start The Taper Clock

While "much has changed since the March and April FOMC meetings", Goldman does not expect the Fed to deliver the first hint at tapering at the June meeting. They note some FOMC participants have expressed eagerness to begin discussing tapering sooner rather than later, but "we see this as normal disagreement."

• Statement: The premise of the language on average inflation targeting is "no longer true": ("With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately 15 above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent." ). Fed may make a small fix (change "running persistently to "having run"), but at some point FOMC will need to explain what AIT demands if inflation averages more than 2% by the time tapering is complete.
• SEP/Dot Plot: No hike in median 2023 dot (but a "close call"). 2021 GDP and unemployment revised upward (+6.7% and 4.7% respectively), no changes to 2022-23. 2021 core PCE up to 2.9%; 2022 and 2023 unchanged. Key question is whether any of the 7 who forecast 1.9% or 2.0% in 2023 in March will raise their forecasts (as they presumably did not show a hike either).
• Future action: First taper hint in Aug/Sep, formal announce in Dec and taper at beginning of 2022.