Powell warns about the beginning of tapering this year, Delta variant permitting

In Short

Chair Powell’s speech turned our more explicit than expected, as he drew strong implications from the rosy picture of the economy the Fed has advertised since the Spring. He claimed that substantial further progress has been reached on the inflation front, while the strong July employment report shows a clear improvement in the labour market.

Highlights:

  • Chair Powell’s speech at Jackson Hole turned out more explicit than expected. If the Delta variant does not disrupt the evolution of the labour market, tapering should begin before the end of the year.
  • Powell reframed the current Fed’s narrative in a more optimistic way. The FOMC deems the progress on inflation (actual and expected) enough to slow down QE; healing of the labour market is under way.
  • To minimise the risk of a taper tantrum, Powell stressed once more the fact that the decision to reduce asset purchases is not related to that of raising rates. Therefore, monetary policy will remain broadly accommodative even after tapering has started.
  • If the Delta variant does not stand in the way of the current strong job creation in services, tapering should begin in November. We stick to our view of a first rate hike in mid-2023.

Read the full publication below

Powell warns about the beginning of tapering this year, Delta variant permitting

The latest views, research and investment insights from our experts

Picture

© Generali Investments, all rights reserved. This website is provided by Generali Investments Holding S.p.A. as the holding company of the main asset management companies of the Generali Group having, directly or indirectly, the majority shareholding in the companies listed below (hereinafter jointly, “Generali Investments”). This website may contain information related to the activity of the following companies: Generali Asset Management S.p.A. Società di gestione del risparmio, Infranity, Sycomore Asset Management, Aperture Investors LLC (including Aperture Investors UK Ltd), Plenisfer Investments S.p.A. Società di gestione del risparmio, Lumyna Investments Limited, Sosteneo S.p.A. Società di gestione del risparmio, Generali Real Estate S.p.A. Società di gestione del risparmio, Conning* and among its subsidiaries Global Evolution Asset Management A/S - including Global Evolution USA, LLC and Global Evolution Fund Management Singapore Pte. Ltd - Octagon Credit Investors, LLC, Pearlmark Real Estate, LLC as well as Generali Investments CEE. *Includes Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”).