The trigger of this shift in sentiment has been the market perception that the Federal Reserve will soon start reducing its asset purchases and conclude the program by the first half of the following year. Additionally, the estimated time before the first hike in the Fed funds rate has been shortened.
The revisions in expectations were fueled by the Fed’s forward guidance referenced to inflation and unemployment, official statements suggesting the proximity of tapering, and incoming data revealing improved economic conditions and prospects in the United States.