Fed Minutes Provide Rough Contours of Tapering Discussion But Very Little Detail

The latest minutes of the Federal Reserve Open Market Committee came out earlier this week. Despite scant detail, there were indications that tapering would be announced and potentially even begin before the end of 2021. The minutes were largely backward-looking, though, and reflected a meeting that occurred before the extent of Delta’s impact was known.

The minutes did indeed show that most members think tapering was appropriate before the end of the year; however, since then, other developments have transpired. Dallas Fed President Kaplan, who is amongst the most hawkish members and had been leading the call for early taper, came out on Friday and said he is reconsidering his position given the rise of the Delta variant. If GDP growth significantly slows, he may favor postponing tapering until the economy is back on a firm footing.

This development makes it pretty unlikely that the market will be surprised by a preliminary tapering announcement in our estimation, but it is certainly possible. On the other hand, Delta may quickly collapse and have minimal effect on economic activity after all is said and done. Reductions in growth forecasts for 2021 have so far been pretty minimal. The 5-30 spread, which has historically moved in response to Fed actions, showed that the...

Unlock this article with a FREE 30-Day Trial!

An FSI Pro, or FSI Macro subscription is required in order to access this content.

*Free trial available only on a monthly plan

Disclosures (show)

Get invaluable analysis of the market and stocks. Cancel at any time. Start Free Trial

Articles Read 2/2

🎁 Unlock 1 extra article by joining our Community!

You’ve reached your limit of 2 free monthly articles. Please enter your email to unlock 1 more articles.

Already have an account? Sign In

Don't Miss Out
First Month Free