Flash: Concern of the Fed’s credibility; to taper or not to taper? – BBH

FXstreet.com (London) - Research teams at BBH noted that some market participants and some Fed officials themselves, like Fisher, have expressed concern about the Fed's credibility in the Fed's decision last week not to taper.

Key Quotes:

“This is a strong claim, especially given that surveys before the event were fairly consistent, showing a full third of the market did not expect the Fed to taper in September”.

“Strong claims need strong evidence. Market-based indicators do not seem to confirm such claims”.

“The bullish flattening (i.e., yields across the curve have fallen with the long-end yields falling more than the short-end yields) is not consistent with such claims. In addition, the dollar's sharp knee-jerk losses are being retraced. The euro, for example, has retraced more than a third of those gains and sterling has retraced about two-thirds”.