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Fed to Announce Timeline to Start Tapering of Asset Purchases Next Month?

Fed to Announce Timeline to Start Tapering of Asset Purchases Next Month?

Posted Monday, August 16, 2021 by
Aiswarya Gopan • 1 min read

Estimates by economists recently polled by Reuters indicate that the Fed could unveil its plans to begin tapering its asset purchase program in September. However, respondents to the poll also expect the unemployment rate across the US to take at least another year to ease back to pre-pandemic levels.

The latest non-farm payrolls report showed that the unemployment rate had fallen sharply to 5.4% for the month of July, heightening investors’ expectations for the Fed to advance its plans to pull back on stimulus initiatives as well as consider tightening its monetary policy. Since then, several Fed officials have also hinted that the central bank could soon start reducing its monthly bond and mortgage-backed securities purchase program of $120 billion.

Almost two-thirds of economists polled anticipate that the Fed could announce plans to start tapering the asset purchase program by as soon as next month. However, some of the respondents offer a more cautious timeline, expecting the process to start by November after at least two employment reports come in strong enough to convince the Fed of the labor market’s recovery from the pandemic’s effects.

Meanwhile, almost 60% of respondents expect the US central bank to start reducing the scope of its asset purchases by early next year, while the remaining group expect it to begin by Q4 2021. In addition, over 80% expect the asset purchases to completely wind up by the end of 2022.

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