Danske expects the Fed to finish tapering in April now, as compared to June previously, in light of Powell's hawkish shift yesterday
The firm is revising its Fed call after Powell's remarks, arguing that the Fed is expected to increase the pace of tapering from $15 billion per month to $25 billion per month so that the taper process can reach its conclusion in April.
They had previously expected the Fed to finish tapering in June (as has most market participants to be fair). Adding that they have been noting that risks were skewed towards a faster tapering pace.
As for rate hikes, they now expect three 25 bps rate hikes starting from June with the other two to come in September and December. But by ending QE in April, "the door is open" for the first rate hike to maybe come about in May.
Thereafter, the firm sees four more rate hikes to follow in 2023.
