Fed to unveil bond-buying taper plan next month
Published: 03:08 PM,Aug 15,2021 | EDITED : 07:08 PM,Aug 15,2021
The Federal Reserve Board building on Constitution Avenue is pictured in Washington. — AFP
WASHINGTON: The United States Federal Reserve will announce a plan to taper its asset purchases in September, according to a solid majority of economists polled by Reuters who also said the US jobless rate would remain above its pre-pandemic level for at least a year.
Since the release last week of a strong US jobs report, which showed an unexpectedly sharp drop in the unemployment rate to 5.4 per cent in July, a flurry of Fed officials have suggested the US central bank might start reducing its $120 billion in monthly purchases of Treasuries and mortgage-backed securities (MBS) sooner rather than later.
Nearly two-thirds of respondents, 28 of 43, said the Fed is likely to announce a taper of its asset purchases — currently set at $80 billion of Treasuries and $40 billion of MBS per month — at its September meeting.
But while that timing has become more likely in the minds of many Fed watchers over the past month, it is by no means a done deal for all of them.
“I know some Fed officials are pushing for it to happen at the September meeting, but that is very unlikely,” said Jim O’Sullivan, chief US macro strategist at TD Securities.
“November is possible if the next two employment reports are strong enough, but the odds favor December as the time of the formal announcement.” More than one-third of respondents in the poll said the central bank’s policy-setting Federal Open Market Committee (FOMC) will wait until November or December. None of the respondents said it would be announced at the Fed’s central banking conference in Jackson Hole, Wyoming, this month, compared with the more than one-quarter who said in a June poll that it would.— Reuters
Since the release last week of a strong US jobs report, which showed an unexpectedly sharp drop in the unemployment rate to 5.4 per cent in July, a flurry of Fed officials have suggested the US central bank might start reducing its $120 billion in monthly purchases of Treasuries and mortgage-backed securities (MBS) sooner rather than later.
Nearly two-thirds of respondents, 28 of 43, said the Fed is likely to announce a taper of its asset purchases — currently set at $80 billion of Treasuries and $40 billion of MBS per month — at its September meeting.
But while that timing has become more likely in the minds of many Fed watchers over the past month, it is by no means a done deal for all of them.
“I know some Fed officials are pushing for it to happen at the September meeting, but that is very unlikely,” said Jim O’Sullivan, chief US macro strategist at TD Securities.
“November is possible if the next two employment reports are strong enough, but the odds favor December as the time of the formal announcement.” More than one-third of respondents in the poll said the central bank’s policy-setting Federal Open Market Committee (FOMC) will wait until November or December. None of the respondents said it would be announced at the Fed’s central banking conference in Jackson Hole, Wyoming, this month, compared with the more than one-quarter who said in a June poll that it would.— Reuters