29 Jul 2021 | News & Feature

FOMC: The taper clock starts, the market shrugs

  • The Fed maintained policy as expected, but finally dropped a clearer signal towards tapering in its policy statement.
  • The market’s reaction remains muted, a sign of the Fed’s success in conveying its still-dovish medium-term outlook.
  • We think that the Fed may make its actual taper announcement during Q4-21 or Q1-22.
  • The increase in Fed’s O/N reverse repo facility outstanding seemed not to have much impact on the broader market sentiment, meaning that EM central banks still have room to maintain accommodative policy, barring higher inflation.