The market has a growing feeling that the Fed will announce an accelerated taper on December 15. I am in that camp as it is hard to imagine the Fed will keep adding stimulus to the economy until mid-2022 when inflation is at 6% or 7 %. However, would not that be a massive step for a generally dovish FOMC?

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How the land lies, with QE set to end in the middle of 2022, there is already plenty of room to have a short pause followed by a hike in H2 2022. Taper compression would signal a clear need the Fed wants to hike twice. It would take a shift on the board's view for that to happen; the dots will need to be repositioned dramatically.

While St Louis Fed President Bullard was his usual hawkish self talking about the early end of the taper, I agree here and think March will eventually be the FOMC consensus. However, he walked back much hawkishness by then following up his remarks that he was still only looking for two hikes next year. If the most hawkish person on the Fed is still only going for two hikes next year, what does this suggest about more moderate board members or even the market pricing, which has two hikes backed in for 2022.

The Fed's next agenda item will be to rework its forward guidance, again. By having dots that pushed the first-rate hike out into 2023, the Fed gave itself the room to concentrate all its efforts on the taper messaging. It kept the two policy decisions separate and avoided the 2013 problem when people considered taper the first step on a path that eventually led to rate hikes.

However, with inflation higher and more persistent than the Fed expected, members are split. Like the San Francisco Fed's Daly, some are happy to wait for pandemic distortions to play out before deciding. Like Bullard at the St. Louis Fed, others want to accelerate taper to open the door to an earlier rate hike if needed. The Fed will need to adjust its rates guidance from what currently amounts to dot-based to a more data-based approach.

For December, a reworked guidance event is much more likely that brings the committee in line: an agreed data-related trigger around a definition or signal of maximum employment. The December FOMC meeting should be expected to be significant guidance rewrite rather than a massive policy decision event that could see yields and the dollar pull back into year-end as the usual bank strategist roll out their annual weaker US dollar predictions. But if you believe that strategist nonsense, you are a bigger fool than me.