Outlook on Fed: September FOMC meetings top headlines
The September Federal Open Market Committee policy meetings are scheduled to begin Tuesday, and will feature one of the most hotly debated topics in the world of finance. Fed policymakers will coalesce in Washington to discuss the current pace of US recovery, and whether or not it warrants the scaling back of monetary easing. The pace and timing of Fed stimulus cuts has made headlines since May of this year, when Fed Chairman Ben Bernanke first hinted at the possibility.
Whether or not the Fed will introduce new policy measures Wednesday is yet to be seen, but opinions on the likelihood of a bond taper vary. On the one hand, economists are expecting the first round of cuts to begin this month, according to Bloomberg’s latest survey. On the other hand, a growing contingency of market participants ranging from investors to analysts believe economic data over the past two months don’t warrant a tapering at this time.
Triggering sentiment against a Fed taper are last week’s consumer confidence and retail sales reports. Consumer confidence fell to five-month lows, and retail sales grew at a slower pace than expected at 0.2 percent. The US economy added 104,000 nonfarm payrolls in July (revised from 162,000) and 169,000 in August, according to official reports from the Labor Department.
US jobs growth over the past two months may serve as a cautionary note to the Fed, who could use it as an excuse to prolong record stimulus. On the other hand, many believe the central bank must introduce its new policy framework well before Ben Bernanke steps down as Chairman in January. The unemployment rate fell to 7.3 percent in August, a 4 ½ year low. According to Fed Bank of San Francisco President John Williams, the central bank already has a multi-step framework in place to reduce federal stimulus.
The Fed will announce its decision whether or not to taper its bond purchases Wednesday at 6:30 EST.
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