FOMC HIGHLIGHTS: Taper accelerated to USD 30bln/month (prev. USD 15bln); sees three rate hikes by end 2022 (prev. one)

Full statement can be accessed here; updated economic projections can be accessed here. 

QE TAPERING:

• 
  TAPER PACE: USD 30bln (prev. USD 10bln Tsys, USD 5bln MBS)


• 
  TAPER END: March 2022 (prev. June 2022), could adjust pace if warranted.


• 
  TAPER GUIDANCE unchanged "prepared to adjust the pace of purchases if warranted by changes in the economic outlook")

RATE FORECASTS:

• 
  2022 DOT: three hikes to 0.9% (prev. saw one 2022 rate hike to 0.3%)


• 
  END 2023 DOT: six hikes to 1.6% (prev. three-four at 1.00%)


• 
  END 2024 DOT: eight hikes to 2.1% (prev. seven 25bps hikes to 1.8%)


• 
  TERMINAL RATE FORECAST: 2.5% unchanged (prev. longer-run forecast of 2.5%)


• 
  RATE GUIDANCE: Unchanged "will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time"

INFLATION:

• 
  END-2022 PCE FORECAST: 2.6% (prev. 2.2%)


• 
  END-2022 CORE PCE FORECAST: 2.7% (prev. 2.3%)


• 
  END-2023, 2024 PCE FORECAST: 2.3%, 2.1% (prev. 2.2%, 2.1%)


• 
  END-2023, 2024 CORE PCE FORECAST: 2.3%, 2.1% (prev. 2.2%, 2.1%)


• 
  LONGER RUN PCE FORECAST: 2.0% (prev. 2.0%)


• 
  STATEMENT: "elevated levels of inflation." (prev. "Inflation is elevated, largely reflecting factors that are expected to be transitory")

Reaction details (19:30)

• In an immediate reaction, a typical hawkish reaction was seen with the dollar catching a bid with EUR/USD falling 1.1260 to 1220 before paring to 1.1240. T-Note Mar'22 Futures fell from 130-18 to 130-8 before paring to 130-11+.


• E-Mini S&P Dec'21 futures initially from 4,625 to 4,610 before reversing and extending to all-time highs, perhaps as the decisions were largely in line with exceptions while the hikes over the forecast horizon only show one extra hike (8 from 7). Inflation is also expected to ease in 2023, as expected, while full employment is seen next year. 


• Fed Funds futures are now pricing in a 90% chance of a Fed hike in April and 50% chance in March.

15 Dec 2021 - 19:05- Fixed IncomeImportant- Source: Newsquawk