The Federal Open Market Committee is meeting this week, and everyone expects the Fed to announce the beginning of an end to quantitative easing.
The Fed has underscored its forward guidance for a slow, multi-stage exit; yet, bond yields continue to rise and the market has steadily pulled in the expected date of the first rate hike. Markets and the Fed currently are not on the same page. We anticipate the Fed will attempt to recalibrate market expectations at this meeting. In our view, the best way to do that is by not tapering in September. Even if the FOMC decides on a “token taper,” we look for further support for the economy through a cautious statement, forecasts that suggest a gradual path for rate hikes, and an overall dovish tone from the Chairman’s press conference.Sponsor Content