Will the Fed Start Easing Off the Gas?
Posted at 8:45 a.m. on Sept. 17
The Federal Open Market Committee begins its September policy meeting today and timing the pullback from the quantitative easing program is the key question for the central bankers.
Bill McBride still thinks the Fed will wait to begin tapering: “I expect another downgrade to the GDP projections and possibly some reduction in asset purchases (but not certain). It does seem odd that the FOMC would start reducing asset purchases while downgrading GDP, and also expressing concern about the downside risks from fiscal policy. With the unemployment rate too high, and inflation too low, there is a strong argument to wait a few more months before starting to taper asset purchases.”
Tim Duy says “odds are that the FOMC moves forward with its plan to end asset purchases with a small, very small, reduction in the pace of asset purchases of $10-15 billion.”
“I anticipate the cut to focus on Treasuries as the Fed will not want to risk further aggravating the mortgage market. I also anticipate a fairly dovish statement – and subsequent press conference – to make clear that an end to asset purchases does not necessarily imply an earlier beginning to rate hikes. In short the Fed will likely be taking its first step toward normalizing policy this week.”