"Omicron mutation weakens the possibility of tapering acceleration."

Amid speculation that the U.S. Federal Reserve (FEB) will speed up tapering (reduction of asset purchases), the Omicron mutation virus has emerged as a big variable. However, it remains to be seen how much it will affect monetary policy for the time being.

On the 29th, the Bank of Korea's foreign investment management agency said in a "market outlook on accelerating the U.S. Fed tapering," adding, "In the market, the development of new mutations will serve as the most important variable for the time being."

In October, the U.S. consumer goods index rose 6.2% year-on-year to a 31-year high, and Fed Chairman Jerome Powell was reappointed, raising expectations for an accelerated tapering in the market. Some investment banks predicted that the Fed will be mindful of the possibility of an early rate hike due to increased inflation related to self-housing costs and tighter-than-expected labor market prospects.

Many predicted that the Fed would end tapering in March to March next year as it increased the tapering size from $15 billion to $22.5 billion to $30 billion every month at the Federal Open Market Committee (FOMC) in December. In line with this, the schedule for normalizing policy interest rates is expected to be advanced.

However, the possibility of accelerating tapering has weakened as omicron mutations have quickly emerged. However, the impact on monetary policy is uncertain. With the emergence of a new mutation, the Fed is expected to show a dovish stance (preferred monetary easing) in the short term, as inflationary pressure increases due to deepening supply bottlenecks.

The Bank of Korea predicted that the U.S. employment index, which will be released on the 3rd of next month, the price index, and Powell's remarks at the hearing, which will be released on the 10th, will determine the future direction.

Date: 2021-11-22

Reporter: 신정훈