28 Oct 2013
Flash: An October treat – BAML
FXstreet.com (London) - By Michael S. Hanson and Brian Smedley, stratgists at Bank of America Merrill Lynch noted that the partial federal government shutdown did not just delay major data releases and trim several tenths from expected 4Q GDP growth.
Key Quotes:
“It is also likely to keep the Fed from tapering this year. Indeed, several Fed officials have indicated that tapering is off the table for now. As a result, what is said at the29-30 October Fed meeting will be more interesting than what is done. We expect no tapering and no changes to forward guidance. However, both of these policy tools are likely to be discussed at length at this meeting, making the minutes of particular interest”.
“Markets will be especially focused on the discussion around the timing and conditions of tapering. Our Chart of the day illustrates three scenarios, the first of which is a useful reference despite not actually happening: a September 2013 start to tapering that follows the June "framework" laid out by Chairman Ben Bernanke for a mid-2014 end to asset buying. In that case, the Fed's asset holdings would have grown to around US$4tn. A January start and a slower pace of unwind results in nearly US$4.5tn in Fed assets, while a June start (and similar slow pace to conclude) yields nearly US$5tn. Those are sizable differences”.
Key Quotes:
“It is also likely to keep the Fed from tapering this year. Indeed, several Fed officials have indicated that tapering is off the table for now. As a result, what is said at the29-30 October Fed meeting will be more interesting than what is done. We expect no tapering and no changes to forward guidance. However, both of these policy tools are likely to be discussed at length at this meeting, making the minutes of particular interest”.
“Markets will be especially focused on the discussion around the timing and conditions of tapering. Our Chart of the day illustrates three scenarios, the first of which is a useful reference despite not actually happening: a September 2013 start to tapering that follows the June "framework" laid out by Chairman Ben Bernanke for a mid-2014 end to asset buying. In that case, the Fed's asset holdings would have grown to around US$4tn. A January start and a slower pace of unwind results in nearly US$4.5tn in Fed assets, while a June start (and similar slow pace to conclude) yields nearly US$5tn. Those are sizable differences”.