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Morgan Stanley: Too Soon To Inaugurate Taper Talk

FED

Apart from some of the usual January meeting "housekeeping" (new voters, shuffling membership on subcommittees, reaffirming longer-run goals statement), Morgan Stanley sees little change at the Jan FOMC.

  • Statement: Small changes, may update characterization of current economic conditions to reflect recent softness in jobs and retail sales.
  • Press conference: Powell to deliver a "steady tone", and focus on the medium-term outlook, remaining cautious about pre-emptively considering withdrawing accommodation, including tapering.
  • On fiscal developments, "Powell will welcome the fiscal expansion he has been calling or over many months, and will likely continue to downplay concerns about inflationary consequences", including potential "upside noise" in inflation data over 2021.
  • Future action: Tapering announcement at the December 2021 FOMC, to start January 2022.

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