Fed Expected to Announce Bond Taper Beginning in November

·2 min read
Veni / Getty Images
Veni / Getty Images

A recent survey of 51 economists told Bloomberg that the Federal Reserve will hint at tapering bond purchases at Federal Open Market Committee and take action with a formal announcement in November.

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The FOMC begins tomorrow and ends on Wednesday, with the Fed announcing its policy statement at 2 p.m. EST. Fed Chair Jerome Powell will hold a press conference at 2:30 p.m., where we will see if the first part of the economists’ predictions came to fruition.

In the Bloomberg survey, conducted Sept. 10 – 15, roughly 67% of the economists said the bond-buying announcement will come at the November meeting and more than half said the tapering will begin in December.

In July, more economists believed the decision would come in December than in November or any other month, and four-fifths of those polled believed tapering would begin in January 2022. In the most recent survey, only 4% believe the Fed would hold off tapering purchases until next year.

Tapering has been a hot topic, with the Fed insisting it will not slow bond-buying until the economy shows “substantial further progress” regarding inflation and employment during the recovery period of the pandemic. However, regional presidents argue that tapering should begin immediately to put the Fed in a better position to raise interest rates in late 2022 if inflation begins to exceed comfortable margins.

The majority of economists forecasted interest rate increases in 2023, as well as three more increases through 2024. The increases would see the federal fund rate at 1.5% by the end of 2024. But for 2021, economists expect rates to remain near zero, which they have throughout the pandemic.

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“The Delta variant and some moderation in inflation should allow the Fed to be patient in tapering, with an announcement likely in November or December, depending on the economic data,” said Scott Brown, chief economist with Raymond James Financial, in a survey response to Bloomberg. “The liftoff in short-term interest rates is still a long way off.”

The majority of the economists surveyed also expect that President Joe Biden will renominate Fed Chair Powell for four more years when his term expires in February.

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