Fed to Taper in November Amid Inflation Concerns, Economists Say
Federal Reserve policy makers are expected to announce this week that they will start scaling back their massive asset-purchase program amid greater concern over inflation, economists surveyed by Bloomberg said.
A majority of the 49 economists in the survey predicted the U.S. central bank will begin the taper in November and wrap it up by mid-2022, curbing the current $120 billion monthly buying pace by reducing Treasuries by $10 billion a month and mortgage-backed securities by $5 billion. They are closely divided on whether interest-rate liftoff will be in 2022 or early 2023, with a slim majority estimating the latter timing while they see rates rising to 1.75% by the end of 2024, a quarter point more than the survey projected in September.
The Federal Open Market Committee meets for two days starting Tuesday and will issue a policy statement at 2 p.m. in Washington Wednesday. There will be no quarterly economic and rate forecasts published at this meeting. Chair Jerome Powell will hold a press conference 30 minutes later.
“A Nov. 3 taper announcement looks a forgone conclusion,” James Knightley, chief international economist at ING Financial Markets LLC, said in a survey response. With inflation persisting, “the taper could end more abruptly than currently signaled with a high probability of at least two interest-rate increases in the second half of next year.”
Almost all the economists expect the FOMC to announce tapering this meeting, which is in line with Powell’s comment on Oct. 22 that “I do think it’s time to taper.” Nearly two-thirds expect the slowing in bond buying to begin this month, with most of the rest looking for a December kickoff. The committee discussed options for both months in its prior meeting in September, according to minutes of that debate.
The committee’s most contentious decision at the upcoming meeting may be how long the tapering should last.