When Will The Fed Begin Tapering: Here's What 10 Wall Street Strategists Think

When it comes to the Fed's Wednesday FOMC statement, economists agree that this meeting should largely serve as a status check of the economic recovery relative to the substantial forecast upgrades that the FOMC unveiled at their March meeting, but things will then heat up in the summer and certainly the fall, when Powell may have no choice but to address the roaring inflation and - gasp - even hint at a taper, risking another bond (and stock) market tantrum.

In any event, after the Bank of Canada became the "taper trial balloon" when it said last week it would scale back its purchases of government debt and accelerate the timetable for a possible rate increase, the Fed is expected to begin trimming its $120 billion in monthly asset purchases before the end of the year as the USbeconomy recovers strongly from Covid-19, according to economists surveyed by Bloomberg. That’s a bit earlier than forecast in the March survey but leaves Fed asset purchases untouched for several more months, with the first interest-rate increase still not expected until 2023.

Ok, but when exactly?

To answer this question, Bloomberg has sifted through and compiled the thoughts of ten of Wall Street's top rates strategists and economists for their outlooks when the Fed will broach the subject of tapering. Here are the results:

Bloomberg (Carl Riccadonna)

  • Our view is that the tapering happens in the first quarter of next year.
  • This will give plenty of opportunity to pre-announce/forewarn/hint/etc. starting from the July semi-annual testimony, through Jackson Hole and over the course of the second half.”

Bank of America (Bruno Braizinha and Mark Cabana, April 23 report)

  • “Recent rate decline does not change our view for higher yields this year”
  • For 10-year, current range of 1.4%-1.7% should move to 1.75%-2.10% as economy improves and Fed signals on taper during second half of year
  • Recommends “to use dips in the newly established trading range to position for higher rates”
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