FOMC Preview: Accelerated Taper Announcement Expected

Expectations are the FOMC will announce a faster pace of tapering assets purchases at the meeting this week.

From Goldman Sachs:

“The FOMC is very likely to double the pace of tapering to $30bn per month at its December meeting next week, putting it on track to announce the last two tapers at the January FOMC meeting and to implement the last taper in March. We now expect the FOMC to deliver rate hikes next year in May, July, and November (vs. June, September, and December previously).”

Analysts will also be looking for comments on inflation and on rate hikes in 2022.

Updated projections will be released at this meeting. For review, here are the September FOMC projections.

Wall Street forecasts are for GDP to increase at close to a 6.5% annual rate in Q4 that would put Q4-over-Q4 at around 5.4% – so the FOMC projections for 2021 are now a little on the high side compared to Wall Street.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP¹
Projection Date	2021	2022	2023	2024
Sept 2021	5.8 to 6.0	3.4 to 4.5	2.2 to 2.5	2.0 to 2.2
June 2021	6.8 to 7.3	2.8 to 3.8	2.0 to 2.5

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 4.2% in November.

The projections for the unemployment rate in Q4 2021 will be revised down.

Note that the unemployment rate doesn’t capture the economic damage to the labor market. Not only are there 1.2 million more people currently unemployed than prior to the pandemic, and additional 2.4 million people have left the labor force since February 2020.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate²
Projection Date	2021	2022	2023	2024
Sept 2021	4.6 to 4.8	3.6 to 4.0	3.3 to 3.7	3.3 to 3.6
June 2021	4.4 to 4.8	3.5 to 4.0	3.2 to 3.8

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of October 2021, PCE inflation was up 5.0% from October 2020. This is above the top end of the projected range for Q4, and projections will be revised up.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation¹
Projection Date	2021	2022	2023	2024
Sept 2021	4.0 to 4.3	2.0 to 2.5	2.0 to 2.3	2.0 to 2.2
June 2021	3.1 to 3.5	1.9 to 2.3	2.0 to 2.2

PCE core inflation was up 4.1% in October year-over-year. Core PCE projections will be revised up.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation¹
Projection Date	2021	2022	2023	2024
Sept 2021	3.6 to 3.8	2.0 to 2.5	2.0 to 2.3	2.0 to 2.2
June 2021	2.9 to 3.1	1.9 to 2.3	2.0 to 2.2