Today is the day we expect the Fed to start tapering asset purchases. We believe the Fed will taper by USD10bn but at the same time strengthen the forward guidance by revising lower the profile for the Fed Funds rate to align it with current market expectations. We also expect the Fed to say it can remain patient before raising rates once the threshold of 6.5% unemployment has been crossed. Over the past weeks data have consistently come in stronger than expected. Retail sales, ISM, industrial production, housing data, job growth – all have been on the strong side and we believe it will be enough for the Fed to initiate the tapering process.
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Danske Bank