Fed Set to Announce Taper in November

No changes to monetary policy today, but plenty of changes to the outlook for monetary policy in the next few years.

Based on language the Federal Reserve added to its statement as well as comments by Fed Chief Jerome Powell at the post-meeting press conference, the Fed is very likely to announce a "tapering" of quantitative easing at the next meeting in early November. The only thing that could stop this is if the economy takes an unexpected turn for the worse. Always possible, not likely.

The key sentence added to the statement was that "[i]f progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted." Then, at the press conference, Powell twice said that the hurdle of "substantial further progress" toward the Fed's goals before taping begins has been "all but met." He also noted that the Fed was only looking for a "decent" employment report between now and then, nothing spectacular.

In addition, Powell made it clear at the press conference that tapering is likely to end by mid-2022 and we shouldn't expect any rate hikes until tapering is done.