The US Federal Reserve will likely double the pace of tapering its monthly bond purchases from January to $30 billion, and wind down its pandemic-era bond buying scheme by mid-March, Goldman Sachs strategists said in a daily note on Thursday.
“The increased openness to accelerating the taper pace likely reflects both somewhat higher-than-expected inflation over the last two months and greater comfort among Fed officials that a faster pace would not shock financial markets,” analysts led by Jan Hatzius said in a client note.
Goldman expects the Fed to start raising interest rates only from June for a total of three times in 2022. The U.S. investment bank is one of the several banks which have recently raised their interest rate hike expectations for 2022 to three from two.
Minutes of the central bank’s November 2-3 policy meeting showed that various policymakers said they would be open to speeding up the taper of their bond-buying programme if high inflation held and would move faster to raise rates.
San Francisco Federal Reserve Bank President Mary Daly said on Wednesday she would be open to accelerating the pace of the central bank's tapering of asset purchases if inflation remained elevated and jobs growth stayed strong.
“If things continue to do what they’ve been doing, then I would completely support an accelerated pace of tapering,” Daly said.
Daly said she was “open” to the idea, but would like to see more economic reports on inflation and hiring and discuss the approach with her Fed colleagues before deciding.
