We were a little surprised by the Fed's conclusion last week that it wasn't ready to begin tapering its asset purchases. As we wrote in our Fed Watch ahead of the meeting, however, a tapering was "far from a certainty" because it was "questionable whether the cumulative improvement in labour market conditions over the past 12 months justifies such a move". What troubles us more is that the Fed appeared to be moving the goal posts as much as coming to a different conclusion about what the incoming data were telling us. That caveat aside, we now think that the Fed will begin tapering in December and, assuming that economic growth accelerates as we anticipate, we would still expect it to halt asset purchases completely by mid-2014.
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