"I expect that a decision to begin tapering asset purchases will be considered in the coming meetings of the FOMC"
- Dennis Lockhart, president of the Atlanta Federal Reserve
The growing uncertainty is looming in financial markets, with stocks turning red and investors tired of predicting Federal Reserve's future moves. A survey conducted by National Association of Business Economists may shed some light on Fed's monetary plans, as the vast majority (64%) of business economists expressed their view the Fed will start pulling back on its monthly bond-purchases in the first three months of 2014. Meanwhile, 30% of respondents believe the Fed will scale back QE in the second quarter. What is even more important is that nine out of ten economists claimed the stimulus programme will be winded down during the next year, after being placed in its current form since December 2012.
Regarding the growth outlook, the NABE predicts the U.S. economy to post stronger growth next year, saying GDP will expand at a 2.8% annualized pace in 2014, compared with the 2.1% growth this year. When assessing the potential impact of the partial government shutdown, the agency said it will reduce the growth in the final quarter by 0.5% or even less. In the meantime, the likelihood of a December taper is relatively low, even despite stronger-than-expected job growth. The Fed is likely to cite subdued investment growth and possibly a renewed warning about too high mortgage rates.
© Dukascopy Bank SA