Flash: Fed signals to be few and far between? – Deutsche Bank

FXstreet.com (New York) - According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “Our gut feel is that the Fed will err on the side of caution with regards to tapering talk and that no additional signal will be given by the Chairman to accelerate the market's fears.”

However this view is more based on the fact that it's a personal view that it would be a policy error to withdraw stimulus today. Indeed the last two quarters have seen the lowest US nominal GDP since Q1 in 2010 - some 13 quarters ago now. This is a weakening nominal recovery and one that even at its peak was still very weak relative to history.

With a huge debt load nominal GDP is very important but it gets far less attention than it deserves. “Nevertheless, the Fed may think very differently to us and their updated economic forecasts will shape their thinking to some degree. They may see the recent dip in inflation as transitory.” they add.