Nomura: Window For September Taper Announcement Likely Closed

While the FOMC will continue to talk on the technical aspects of tapering (timing, pace and composition in July), Nomura believes "the window for advance notice for a September announcement is likely closed at this point."

• With some participants acknowledging that the inflation part of "substantial further progress" has been met, Nomura believes taper timing depends more on NFP growth – skewing risks toward an earlier-than-expected taper announcement.
• Powell likely to reiterate the Fed's view of transitory inflation, with upside risk, while potentially providing more guidance on the Committee's evaluation of "substantial further progress."
• Future action: December announcement, effective January (risks of a Nov announcement), running over ~12 months. MBS to be tapered proportionally more quickly ($8B per meeting vs $10B Tsy, ending MBS after June 2022, Tsy after Nov 2022). Rate liftoff Q2 2023, next one in Q4 2023.