October 13, 2021 | 14:34
Minutes of Sep. 21-22 FOMC Meeting: Taper Is Nigh
The minutes of the September policy meeting confirm that tapering will begin "soon" and end around the middle of next year, though rate hikes are still a long ways off, despite heightened concerns about inflation. All members of the FOMC have signed onto the tapering-should-likely-occur-soon line. One plan under discussion at the meeting would see the monthly pace of bond purchases reduced by $15 billion until the program ends in the middle of 2022. The members noted that, if tapering is announced at the November 2-3 meeting (our view), then the actual reduction in asset purchases could start in either mid-November or mid-December.
But the FOMC went out of its way to note that tapering soon doesn't mean rate hikes are on the horizon. While the members might be getting antsy about inflation staying higher for longer, they haven't thrown in the transitory towel. And they still largely think the economy won't return to full employment for some time, despite seemingly worsening labour shortages. We continue to expect an early 2023 rate hike, though the trigger could be pulled earlier if inflation doesn't subside next year.