MUFG Research discusses its expectations for the Fed January policy meeting on Wednesday.
"We expect the Fed to reiterate a dovish policy signal at this week’s FOMC meeting. The Fed are likely to re-emphasize that it is still too early to talk about slowing the pace of QE at the current juncture despite the increased likelihood of bigger fiscal stimulus under the Biden administration," MUFG notes.
"We expect the Fed to more seriously consider a signal that it is planning to slow the pace of QE later this year if effective vaccines have supported a stronger economic recovery. While a QE taper announcement could be delivered later this year, the Fed may not begin to slow the pace of QE purchases until next year," MUFG adds.