NatWest: Teeing Up Tapering For Later “This Year”

NatWest says the "case for a cutback hasn't fully gelled just yet to announce tapering in the coming week", which will leave "the situation in which the market is likely to be kept on edge by constant suggestions from FOMC members that cutbacks are either probable or imminent, depending on the perspective of each individual Fed official."

• Statement: Updating fwd guidance by replacing "in coming meetings" with "this year".
• SEP/Dot Plot: Median dot to signal 0 hikes in 2022, dot up a bit in 2023 (if one more official pencils in a hike, the median moves up from 0.625% to 0.75%). Four additional hikes in 2024 (1.75%). L-T still 2.50%. 2021 GDP lower; more inflation in 2021 but slower in 2022.
• Press conference: Powell to reiterate "we are carefully monitoring incoming data"
• Future action: Taper announced in November, with language it's not on a "preset course". Reductions starting at December meeting, though risks are that actual reductions begin in November if the Sep payrolls report is strong enough (though it could be negatively impacted by Hurricane Ida). $10B / $5B of Tsy/MBS w reductions announced meeting-by-meeting rather than automatically each month.