Yesterday, we pointed out that according to the latest Bloomberg survey of economists, roughly 70% of respondents now believe that a taper is coming in either December or January, further accentuated by the recent flipflopping of Fed "bellwether" James Bullard who after holding out for a much delayed reduction in the Fed's monthly flow, admitted that the "probability of a taper had risen [5]". Today, some additional thoughts on what now seems the consensus from Credit Suisse: "With the labor market looking to be on a more sustained recovery trend following a late summer set-back we think tapering is now virtually inevitable with the decision between a Dec or Jan taper a virtual toss-up that may come down to Fed perceptions of market liquidity in the latter part of December." And just to add fuel to the flame here comes CNBC's own staff "Fed expert" Steve Liesman with "get ready, here it comes: A December taper. [6]"
It increasingly appears that tapering is coming at the Fed's meeting next week.
While forecasting the central bank's moves has been an uncertain proposition for most of the past several months—with the conventional wisdom having it wrong in June and September—several of the Fed's own financial tests for reducing its asset purchases look to have been met as it heads into the Dec. 17 meeting. Those include confidence in the outlook, an easing of fiscal drag and uncertainty, and what the Fed sees as more appropriate interest rates.
And while the market has been beyond complacent, and is confident that "this time is different", all it will take for a "tightening of financial conditions" is for one big seller to decide the time has come to take profits, and to ruin the Fed's latest carefully laid plan to make it seem that Tapering (which the Fed will not tire of repeating is not tightening even though even the Fed has now admitted it is the Flow and not the Stock) is priced in, and make a mockery of all "consensus" forecasts yet again.