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(Z1) Off Lows, But Remains Weak


Still Vulnerable


Bullish Price Sequence

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ING opined on the lack of a "detailed outline of the tapering path and we probably won't get that until the actual announcement – Powell merely states it ending around mid 2022 "may be appropriate". ING cited a recent Bbg survey that "showed a majority of analysts expect a Nov annc with a Dec start point, which we agree with. The consensus is for it to be a straight-line path of $15bn of tapering each month ($10bn Treasuries and $5bn Agency MBS) so it takes eight months (July). We think it could start at this rate, but wouldn't be surprised to see an acceleration towards the end and it concluding in six (May 2022)."

  • ING anticipates "inflation will be more persistent than the Fed does with ongoing supply chain constraints, worker shortages and other production bottlenecks unlikely to ease meaningfully before the end of this year and possibly not until well into next. This is keeping costs elevated with the Fed's own Beige Book already warning that "several Districts indicated that businesses anticipate significant hikes in their selling prices in the months ahead", suggesting corporate pricing power is back.
  • With the latest Covid wave showing signs of abating we also expect a re-acceleration of activity through 4Q, which we think will lead to even more Fed members backing a 2022 rate hike in the December forecast update.
  • We would certainly agree and are forecasting the first move in September 2022 with a follow up hike in December. By moving earlier this will mean a lower terminal Fed funds rate – we see it peaking at 1.5% versus the 2.5% figure projected by the Federal Reserve."