Despite Friday's weak jobs report, economists still expect the Fed to taper its asset-purchasing program towards a windup of QE. However, there has been a slight shift in consensus in that economists are now calling for a dovish taper or taper light, meaning that the pace of asset purchases will be reduced, but not by as much as previously expected. The view is that the Fed must taper due to the size of its balance sheet, scepticism over its continued value, and a desire to maintain credibility. UBS expects a token taper of $US10 billion to be announced at the September meeting. Similarly, Goldman Sachs' Jan Hatzius expects only a dovish taper with a reinforcement of the forward guidance for the funds rate. Basically, the consensus is that the Fed will slow down asset purchases in the upcoming meeting, but in the most minimal way possible. (VIEW LINK)
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