Nordea with the note:
We continue to find that the Fed is too confident in the transitory narrative, even if they have moved consistently in the direction of our views since the beginning of this year. Our newly updated forecast of three rate hikes during 2022 (June, September and December) is admittedly slightly under pressure should the Fed not decide to increase the tapering pace already into Q1, but we also find that a monthly tapering pace of 20bn is on the cards during Q1. Tapering at 15bn a month will conclude the process in mid-June 2022.
The Fed has recently clearly decreased the confidence in the “transitory” narrative as inflationary pressures keep piling up in the US economy (US inflation: Five charts on why US inflation hasn’t peaked yet!). The broad wage growth that we are currently seeing usually spills over to a substantially higher median CPI with a time lag of 6-9 months, which will likely lead median prices higher through 2022. This is exactly the kind of inflation that the Fed fears the most, which is also why the Fed may change its course should the median CPI suddenly print above 4.5% as we predict – at least it is enough to tempt the Fed into a faster tapering process.
