Nordea with the note. I am not as confident as they are on an imminent taper.
Tapering is now openly the base case of the Federal Reserve for this year unless something goes wrong. The meeting minutes revealed a fairly big hawkish turn from a majority of the FOMC members. “Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year”. Stocks are not happy, but the USD is, while the fixed income response has been fairly muted.
It shouldn’t come as a big surprise that a lot of FOMC members openly favour tapering this year, as they have been on parade with that message in the press over the past three to four weeks. The big question is how aggressive the Fed intends to be – some members suggest a substantially more hawkish tapering profile than our forecast already now – including Bullard (hawk) who suggested ending the asset purchases by 22 March. Just three or four months ago, we had the most aggressive Fed forecast in the world. That is no longer the case as the Fed and other analysts have caught up with our view.
