Federal Reserve Chairman Ben S. Bernanke next month will probably reduce the central bank’s $85 billion in monthly bond purchases, according to 65 percent of economists surveyed by Bloomberg.
The Federal Open Market Committee’s first step may be small, with monthly purchases tapered by $10 billion to a $75 billion pace, according to the median estimate in a survey of 48 economists conducted Aug. 9-13. The Fed will end the buying by mid-2014, they said. In a survey last month, half of economists predicted a Fed reduction in bond buying at the next scheduled FOMC meeting Sept. 17-18.
“While the data hasn’t been great, it’s been good enough to support the notion of tapering,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford,Connecticut, and a former Richmond Fed economist. “They want to wind this down in an orderly way and get it done in a reasonable period of time.”
Bernanke and his policy-making colleagues are contemplating how to finish a third round of so-called quantitative easing that has swelled the Fed’s balance sheet to a record $3.59 trillion. The unprecedented bond buying is aimed at combating unemployment and bolstering an economy that expanded by only 1.4 percent in the 12 months through June.
The unemployment rate has fallen to 7.4 percent from an 8.1 percent rate reported the week before the Fed started the current bond-buying program in September. The central bank will learn more about employment on Sept. 6, when the Labor Department issues a jobs report for the month of August. In July, the economy added 162,000 jobs and the unemployment rate dropped to 7.4 percent from 7.6 percent.
Source: Bloomberg, Aug 14, 2013.
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