Fed's monetary policy - Nomura

Analysts at Nomura explained that with the April unemployment rate at 4.4%, the question is at what pace the FOMC will remove the accommodative monetary policy. 

Key Quotes:

"This week saw a renewed focus on resolving outstanding questions on the Fed’s balance sheet adjustment but with little new information. Boston Fed President Rosengren, a non-voting member, indicated a preference for balance sheet adjustment starting after the June FOMC meeting. 

However, earlier in the week, President Dudley reiterated his view that the long-term balance sheet will be larger than pre-crisis levels and he expects gradual balance sheet adjustment to begin in late 2017 or early 2018 with Treasuries and MBS affected simultaneously. Speaking after today’s CPI release President Evans said he would need more CPI data to conclude that inflation is slowing. 

He said “the unemployment rate is at 4.4%... this ought to support getting inflation up to our 2% objective.” Evans also reiterated language in the minutes from the March meeting that indicated balance sheet adjustment “later this year” while stressing that the timeline for reduction process is uncertain and “might take 3, 4 or 5 years”. On net, while consensus on the need to start balance sheet adjustment relatively soon (i.e., by the end of the year) seems to have firmed, many questions remain regarding specifics."