Tapering has been on the tip of every investor’s tongue over the past couple of months following the Fed’s hawkish approach to announce a possible interest rate hike in 2023.
The Jackson Symposium was a crucial turning point as Fed chair Powell announce that from their point of view some substantial progress has been made. This is yet to be seen as we got some mixed NFP figures that suggested there might be a bit of a slowdown from the private sector, as both the NFP and ADP figures came out lower than expected. However, what we did see was that the unemployment rate did decline quite substantially declining from 5.4% to 5.2% giving us an indication that the labour market is on the right track.
Inflation seems to have stabilised just above the 5% as inflation declines slightly from 5.4% to 5.3%, possibly giving the Fed an indication that their view on high inflation may very well be transitory.
The markets have been pricing the possibility of tapering as US indices declined sharply in the lead-up to today’s FOMC meeting, Gold followed suit it broke $1780 on Thursday and declined sharply to close the week out on $1753.
There should be a lot more dollar strength coming into the market with the possibility of a risk-off approach being taken as the Fed plans to take a step back from their asset purchasing.
The anticipation from the market is that tapering is set to be announced during this month’s FOMC meeting with the implementation set to kick off next month.