The U.S. Federal Reserve building, in Washington, on Aug. 6.DANIEL SLIM/AFP/Getty Images
Goldman Sachs economists have raised the odds that the U.S. Federal Reserve will announce the start of tapering its bonds purchases in November, predicting the central bank will likely opt to dial back purchases by US$15-billion then and at meetings that follow.
In a note, the investment bank said it had raised the odds that a formal taper announcement will come in November to 45 per cent from a previous forecast of 25 per cent, and lowered the December chance to 35 per cent from 55 per cent.
According to Goldman, a US$15-billion per meeting total pace of tapering would likely be split between US$10-billion of U.S. Treasuries and US$5-billion of mortgage-backed securities.
“A November announcement coupled with a $15bn per meeting pace would mean that the FOMC would make the final taper at its September 2022 meeting,” the Goldman Sachs analysts said in a note dated Aug, 18, referring to the Fed’s Federal Open Markets Committee.
The timing and pace of the unwinding of Fed stimulus is a key focus for markets, with recent robust jobs data boosting talk that a taper could come sooner rather than later.
But with the COVID-19 Delta variant spreading across the United States and supply chain disruptions persisting, many economists are lowering their growth outlooks. And a still uncertain outlook means the Fed may prefer to err on the side of caution in its tapering timeline.
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