USD: Any Talk Of Fed Tapering Premature; Biden's Plan Could Tamper Recent Rise In US Yields

01/16/2021

Citi discusses the outlook for the Fed policy trajectory.

"FOMC heavyweights have confirmed that any talk of tapering is premature - with Powell bringing up the rear after Clarida and Brainard earlier in the week. Powell confirmed that the Fed would wait for a sustainable overshoot of their 2% inflation target, and would not seek to "hike rates anytime soon.".. This confirms CitiFX Strategy's view that the Fed will undoubtedly remain very dovish," Citi notes.

"Biden's announcement was largely in line with expectations, coming in at USD1.9tn. CitiFX notes that this could temper the recent rise in US yields. We believe that the latest moves higher have largely been a function of increased supply expectations and likely overshot," Citi adds.