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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.