19 Sep 2013
Flash: Prospect of a long delayed taper much higher - RBS
FXstreet.com (Barcelona) - In words of Greg Gibbs, FX Trading Strategist at RBS, the decision not to taper by the Fed "goes down as one of the bigger surprises in my career as an analyst, I thought the Fed were one of the more predictable central banks" Gibbs notes.
Key Quotes
Our US economist wrote: “In the FOMC statement, the Fed cited the downside economic risks associated with the recent tightening in financial market conditions. In our view, today's actions were intended to push back hard against that move.”
"This suggests that the Fed has been surprised and spooked by the size of the rise in long term yields since it began to talk-taper. This is perhaps one of the more dovish aspects of the event, since the Fed prefers lower yields and is prepared to prolong QE to get them. A clear negative for the USD. This is in clear contrast to recent BoE events which have failed to express concern over the recent back up in yields."
"Our US Economist added: “We do not expect the economy to look much different in December, so it is not clear to us at this time that we should assume tapering is going to be announced in December (in his Q&A, Bernanke seemed less committed a 2013 start date, "saying we'll take the first step at some point, possibly later this year")."
"Indeed, the outgoing Chairman may well choose to leave that decision for the next Fed Chair.” By not starting now, odds shift to not until next year, in which case it much depends on the new Fed Governor. With Yellen as favourite, the prospect of a long delayed taper is much higher."
Key Quotes
Our US economist wrote: “In the FOMC statement, the Fed cited the downside economic risks associated with the recent tightening in financial market conditions. In our view, today's actions were intended to push back hard against that move.”
"This suggests that the Fed has been surprised and spooked by the size of the rise in long term yields since it began to talk-taper. This is perhaps one of the more dovish aspects of the event, since the Fed prefers lower yields and is prepared to prolong QE to get them. A clear negative for the USD. This is in clear contrast to recent BoE events which have failed to express concern over the recent back up in yields."
"Our US Economist added: “We do not expect the economy to look much different in December, so it is not clear to us at this time that we should assume tapering is going to be announced in December (in his Q&A, Bernanke seemed less committed a 2013 start date, "saying we'll take the first step at some point, possibly later this year")."
"Indeed, the outgoing Chairman may well choose to leave that decision for the next Fed Chair.” By not starting now, odds shift to not until next year, in which case it much depends on the new Fed Governor. With Yellen as favourite, the prospect of a long delayed taper is much higher."