Half of economists in poll expect Fed to taper stimulus in Sept.
WASHINGTON -- Half of economists in a poll released Tuesday said they expected the Federal Reserve to start tapering its monthly bond-buying purchases in September.
The percentage was up from last month, when 44% of economists in the survey by Bloomberg News said they thought that Fed policymakers would begin ratcheting back one of the central bank’s major stimulus efforts at its September meeting.
None of the 54 economists in the poll, taken July 18-22, believed the Federal Open Market Committee would decide to start reducing the bond purchases at its next meeting at the end of this month.
But 50% of those economists targeted the Fed’s Sept. 17-18 meeting as the likely date for a decision to ease off the $85 billion in monthly purchases. The median estimate of those economists was for the Fed to reduce the monthly purchases to $65 billion.
Half of the economists surveyed predicted the Fed would end the purchases in the second quarter of next year.
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Analysts have looked to the September meeting because it is followed by Fed Chairman Ben S. Bernanke’s quarterly news conference. Scaling back the bond purchases is a major move and would benefit from further explanation by Bernanke at the news conference, Fed watchers said.
Bernanke’s next news conference doesn’t come until after the Fed’s December meeting.
Fed officials also have strongly hinted they might act in September. Bernanke said in May the Fed could start reducing the purchases in the next few months if the economy recovery continued to improve.
And in a speech last month, Fed Governor Jeremy C. Stein specifically referred to September as the hypothetical starting point for a reduction in the bond purchase program, also known as quantitative easing.
The program, started in September 2012, was designed to boost the economy by pushing down long-term interest rates.
In recent weeks, financial markets have reacted to the program’s potential end by driving up mortgage and other long-term interest rates.
Bernanke sought to calm the markets last week by telling lawmakers the Fed was not on a “preset course” to reduce the bond purchases and would delay such a move if economic conditions did not continue improving at the pace the central bank expected.
Bernanke also stressed the Fed would start reducing the purchases in “measured steps” that could be reversed if economic conditions warranted.
And he has noted the Fed planned to continue stimulating the economy by keeping its benchmark short-term interest rate near zero until the unemployment rate fell to at least 6.5%.
The unemployment rate was 7.6% in June and is not forecast to fall to 6.5% until at least the end of 2014.
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