The Federal Reserve’s statements suggest that it will reduce the size of its asset purchases from the end of 2021; those from the European Central Bank suggest that it will reduce them in 2022. If, in late 2021 and in 2022, there is a slowdown in growth and significant disinflation then it will be difficult for the Fed and the ECB to justify tapering, analysts at Natixis report.
The fresh COVID-19 wave in the US from summer 2021
“The first obstacle to tapering concerns the US in particular: the rising number of COVID-19 cases due to a wave of the Delta variant, which is weakening the economy: declining production prospects, household confidence, job creation.”
The risk of a growth slowdown in late 2021 and in 2022
“Growth at the end of 2021 and in 2022 may be slowed by the likely reduction in fiscal deficits between 2021 and 2022, the fall in real wages in 2021 and commodity supply bottlenecks, which are holding back growth in several sectors.”
Disinflation, which could be significant between 2021 and 2022
“The central banks are forecasting significant disinflation between 2021 and 2022, but it could even be more pronounced, given the absence of a rise in unit labour costs and a change of the sign of the base effect of commodity prices, which, after having risen significantly between 2020 and 2021, will fall (even if only slightly) between 2021 and 2022.”
“As has been all but announced, especially in the United States, the solution may be a partial and conditional tapering of securities purchases.”
