Basically, There's No Consensus Regarding What The Fed Will Say Today

Ubs taper expectationsUBS71% predicted tapering would begin in September. They were wrong.

All eyes will be on the Federal Reserve at 2:00 p.m. ET today as it ends its two-day Federal Open Market Committee (FOMC) meeting.

The big question on everyone’s mind: will the Fed announce a tapering of its quantitative easing program.

The consensus expects the Fed to announce tapering in March. However, there are almost as many people who think it could happen today. (See the right side of the chart)

Basically, there’s no consensus.

And don’t forget, almost every economist on Wall Street expected the Fed to taper back in September, but they were wrong. (See the left side of the chart.)

In other words, economists are not very good at this.

Here’s UBS with a quick rundown of the evolving expectations:

Surveys show that March is considered by economists to be the most likely timeframe for a taper (39%), with a sizable percentage of economists anticipating a taper announcement at the December meeting (33%). (Tuesday’s reported 0.2%m/m gain in the core CPI lends support to our forecast for a taper announcement to occur at the Jan FOMC instead of March.) In the immediate aftermath of the non-taper in September (where 71% of economists expected a taper), the vast majority of economists shifted their call to the December meeting. (See chart on following page.) Since that initial shift, there has been a gradual erosion of that view in favour of a later taper, as Fed officials attempted to explain their lack of action. The recent strong payroll report caused a reversal some of that trend.

Some economists argue that any discussion of tapering is incomplete without a discussion about forward guidance. In other words, any survey about tapering expectations is pretty much pointless as it is incomplete.

Regardless, the wait is almost over and we’ll find out if if these 33% are right at 2:00 p.m. today.

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