Fed Nears Agreement to Implement Tapering in November

WSJ Reports... CNBC Also Expects Tapering to Start Within This Year
Likely to Conclude Rapidly by Mid-Next Year
Chairman Powell May Mediate Hawk-Dove Disagreements

[Asia Economy New York=Correspondent Baek Jong-min] There is a forecast that the U.S. central bank, the Federal Reserve (Fed), will begin tapering (reducing asset purchases) in November. It appears to be becoming a foregone conclusion that the Fed will put an end to the emergency monetary policy introduced to overcome the COVID-19 economic crisis.

The U.S. Wall Street Journal (WSJ) reported on the 16th (local time) that given the soaring inflation and strong employment data in June and July, the Fed is expected to announce its tapering plan at the Federal Open Market Committee (FOMC) meeting in September and could start tapering as early as November.

Additionally, it is reported that the Fed is pushing to complete the tapering process by mid-next year. Currently, the Fed supports economic normalization by purchasing $80 billion worth of U.S. Treasury bonds and $40 billion worth of mortgage-backed securities (MBS) every month.

The U.S. economic broadcaster CNBC also expects the Fed to announce tapering after the September FOMC meeting, estimating the implementation could be as early as October.

This report came ahead of the July retail sales announcement scheduled for the next day and remarks by Fed Chair Jerome Powell. The minutes of the July FOMC meeting, to be released on the 18th, are also likely to provide hints about tapering. The Jackson Hole meeting, held from the 26th to 28th, is an important stage where tapering may be mentioned.

The number of Fed officials demanding early tapering continues to increase. James Bullard, President of the San Francisco Fed, was a representative dove but has turned hawkish.

CBNC analyzed that despite ongoing mentions of tapering, the U.S. stock market is rising and U.S. Treasury yields are falling, signaling that the tightening shock Powell has been concerned about may not occur. This situation could also lead Chair Powell to support tapering.

The fact that discussions about tapering took place at the June and July FOMC meetings, which was sufficiently pre-announced, is interpreted as meeting the conditions for tapering. If opinions among Fed officials diverge, Chair Powell is expected to slightly adjust the timing of tapering implementation or mediate differences regarding the tapering completion timeline.

This content was produced with the assistance of AI translation services.