The Federal Reserve will announce a plan to taper its asset purchases in September, according to a solid majority of economists polled by Reuters who also said the U.S. jobless rate would remain above its pre-pandemic level for at least a year.
Nearly two-thirds of respondents, 28 of 43, said the Fed is likely to announce a taper of its asset purchases - currently set at $80 billion of Treasuries and $40 billion of MBS per month - at its September meeting.
But while that timing has become more likely in the minds of many Fed watchers over the past month, it is by no means a done deal for all of them.
Nearly 60% of respondents, 26 of 43, said they expected the Fed to start the reductions of its asset purchases in the first quarter of next year. Nearly all the rest said it would happen in the fourth quarter of 2021.
"I know some Fed officials are pushing for it to happen at the September meeting, but that is very unlikely," said Jim O'Sullivan, chief U.S. macro strategist at TD Securities.
"November is possible if the next two employment reports are strong enough, but the odds favor December as the time of the formal announcement."
More than one-third of respondents in the poll said the central bank's policy-setting Federal Open Market Committee (FOMC) will wait until November or December. None of the respondents said it would be announced at the Fed's central banking conference in Jackson Hole, Wyoming, this month, compared with the more than one-quarter who said in a June poll that it would.
The poll concluded the Fed will start with monthly reductions of $10 billion in its purchases of Treasuries and $5 billion in those of MBS. Some responses were as high as $20 billion for both Treasuries and MBS.
More than 80% of respondents, 24 of 29, said they expect the Fed to stop purchasing assets by the end of next year.
Reference: Reuters
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