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Bullish Price Sequence

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JPM noted the "Committee was evenly divided (9-to-9) as to whether they anticipated any hikes next year, so the year-end '22 dot moved up from 0.125% in June to 0.25% today. The '23 median went from 0.625% to 1.0%, and the first look at '24 indicated a median expectation of 1.75%."

  • "One message from today is that tapering is now effectively on cruise control (let's not say autopilot). With that issue receding, the next question is liftoff timing, and Powell stated that will depend on "labor market conditions consistent with maximum employment." Powell followed this up by admitting that there are conflicting signs as to how far we are from meeting that test.
  • Powell's remark that "a gradual tapering process that concludes around the middle of next year is likely to be appropriate" is a considerable departure from the 2013-2014 experience, when Fed leadership stressed that decisions would be data dependent and not on a preset course. We and consensus had expected a per-meeting reduction in the monthly purchase pace of $10 billion for Treasuries and $5 billion for mortgages. This would have concluded asset purchases next fall. This means either (a) they have a larger per-meeting reduction in mind, or perhaps (b) they trim purchases every month instead of every meeting."