Goldman Sachs is sure of it: the Fed will not taper this week. The last call of the investment bank was not so good, but who knows. Maybe the ‘Masters of the Universe‘ are right this time around.
The Fed is coming together this week for the last time this year for the FOMC meeting on the 17th and the 18th of December. And once more, the financial markets hold their breath. Will Bernanke finally press the tapering button, or will he leave scaling back the quantitative easing program to his esteemed successor, Janet Yellen. Goldman Sachs believes they know the answer to that.
Goldman Sachs: no tapering in December
Analyst David Mericle of Goldman Sachs came out with a research report of no less than 9 pages regarding the possibility of tapering by the Fed in December. We will save you the pain of reading that: below are the main points of the research report.
1) The economic data has a positive mix since October. The last jobs report was very good, however the inflation picture is not very positive. There is almost no inflation in the US and that is not something the Fed likes.
2) The recent communication from the Fed, the minutes from the latest Fed meeting do not point out an agreement to what needs to happen and when.
3) The market expectations play a role too. Although there are parties who expect the Fed to taper in December, but that group is still a minority. The Fed is not really waiting on a lot of unrest on Wall Street, says Mericle.
Based on the above, Mericle believes that the Fed will start tapering in January at the earliest, but that March is an option just as well. Next week we will know if Goldman Sachs is right this time.
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