BofA Merrill Lynch Global Research – A Global Economics Rates & FX Report – Wednesday, 18 September 2013
As we expected, the Fed decided to “await more evidence” for a sustained improvement in the economy before tapering. The FOMC hammered home that “asset purchases are not on a preset course,” and demonstrated the patient, data dependent nature of their policy stance by citing several areas of concern. In addition, revised FOMC projections suggest a more gradual pace of rate hikes. We still anticipate that a combination of better data later this year, easier financial conditions, and resolution of near-term fiscal uncertainties will allow the Fed to taper in December. However, given the very dovish message on Wednesday, the risk of no tapering until 2014 has risen, in our view.
Read the full report here.