JPMorgan: Watch For A 2022 3-Hike Dot Median

JPM expects the Fed to double the tapering pace to $30B/month at the December meeting, which “keeps the math simple” and results in an end to asset purchases in March.

• Statement: Most notable change will be “transitory” replaced with a more detailed description of inflation developments. Might not be the right time for major edits to the “inflation having run persistently below” language.
• SEP/Dot Plot: 3 a little more likely than 2 dots in 2022. While focus is on the 2022 median, the message from the following years also important: JPM expects end-2024 to be close to the median estimate of the neutral rate, 2.5%.
• JPM notes that “naming where we expect each dot to move gains added complexity at this meeting given that Boston and Dallas will be represented by their interim presidents, and given that outgoing Governors Clarida and Quarles might or might not submit dots.”
• Press conference: Powell could mention that rate hikes will precede balance sheet runoff. To reiterate that tapering and liftoff have different tests.
• Future action: Liftoff in June 2022 (previously Sept), quarterly hikes thereafter