Fed Should Start Tapering, But It Won’t

Subject: Fed Should Start Tapering, But It Won’t Mon Apr 26, 2021 6:13 pm

Policy makers need to quit kicking the can down the road and pare back their extraordinary measures.

Fed Should Start Tapering, But It Won’t -1x-1

I suspect that Federal Reserve officials are not the only ones looking for an uneventful policy meeting this week. The majority of market participants are also expecting an undramatic event that will include an upgrade of the economic outlook, a reiteration of uncertainties and the signaling of nothing new on policies. Unfortunately, it’s an outcome that kicks the policy can further down the road when the central bank should be thinking now about scaling back its extraordinary measures.

Although Fed officials raised their growth estimates significantly at their last meeting, they will most likely upgrade their economic outlook for 2021 again after the recent string of strong economic data. This will be accompanied by the usual Covid-related qualifications when accelerating vaccine deployment continues to race against growing infections and the threat of new variants of the virus.

The further improvement in the economic outlook is unlikely to change the Fed’s policy guidance, however. Rather than follow the lead of the Bank of Canada, which last week began cutting back on bond purchases and signaled a quicker time frame for the next interest rate increase, the Fed will most likely take an approach similar to the one the European Central Bank conveyed last Thursday. It will maintain policy as is, remind markets that it is willing to do even more should downside risks materialize and play down the risk of inflation and other overheating as transitory.

.https://www.bloomberg.com/opinion/articles/2021-04-26/fed-meeting-central-bank-should-start-tapering-but-it-won-t?fbclid=IwAR2oBx49jK5ErasRO0LSRKBpTMC9qiXIzlWmpcwKTiCuQxqBwVpYo-kZfHo

Fed Should Start Tapering, But It Won’t

Fed Should Start Tapering, But It Won’t

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