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Mohamed A. El-Erian

Fed Should Start Tapering, But It Won’t

Policy makers need to quit kicking the can down the road and pare back their extraordinary measures.

Time to get off the fence.

Time to get off the fence.

Photographer: Susan Walsh-Pool/Getty Images

I suspect that Federal Reserve officials are not the only ones looking for an uneventful policy meeting this week. The majority of market participants are also expecting an undramatic event that will include an upgrade of the economic outlook, a reiteration of uncertainties and the signaling of nothing new on policies. Unfortunately, it’s an outcome that kicks the policy can further down the road when the central bank should be thinking now about scaling back its extraordinary measures.

Although Fed officials raised their growth estimates significantly at their last meeting, they will most likely upgrade their economic outlook for 2021 again after the recent string of  strong economic data. This will be accompanied by the usual Covid-related qualifications when accelerating vaccine deployment continues to race against growing infections and the threat of new variants of the virus.