The Federal Open Market Committee statement and Powell’s press conference on Wednesday US time were both non-eventful.
Responses are coming in, this a quick summary on what Oxford Economics have to say:
Powell signalled the FOMC would rather risk erring on the side of removing accommodation too slowly then removing it too rapidly, for several reasons:
- heightened uncertainty around the pandemic remains
- the economy and labour market are far from full recovery
- new policy framework is asymmetrically dovish
- policymakers want to avoid ‘taper tantrum’ that would send long-term rates higher
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Oxford Economics forecast is for a ‘gradual’ QE taper to being in 2022. but by the end of that year, the Fed’s open market account will remain very elevated.
