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J.P.Morgan note that “Fed Chair Powell’s Congressional testimony today was a fair bit more hawkish than the prepared remarks that were released yesterday afternoon. Prior to omicron, a number of Fed speakers from across the spectrum of hawks and doves had commented that it may be appropriate to decide to speed up the pace of tapering at the December meeting. Powell’s prepared remarks released yesterday indicated that omicron poses downside risks to employment and increases uncertainty about inflation, which suggested perhaps they were reconsidering the faster taper talk. However, in the Q&A part of today’s testimony, Powell confirmed the pre-omicron Fedspeak and said it may be appropriate to conclude asset purchases “perhaps a few months sooner,” and that he expected they would discuss this option at the upcoming meeting. He appeared to be using notes, suggesting it wasn’t an offhand remark.”

  • “To be sure, he followed this up by noting that they will also have more employment and inflation data as well as a better sense of the new variant before making any decision. Powell also mentioned that it may be time to retire the “transitory” term in discussing inflation, not because he doesn’t think inflation won’t moderate but rather because the term has given rise to a lot of confusion as to its exact meaning.”
  • “Given the consistency of the message about tapering coming from the Fed in recent weeks, it now looks like it will take a deterioration in the public health situation over the next two weeks to prevent the FOMC from deciding to quicken the pace of tapering at the next meeting.”