Tags: Fed | taper | September | debt

Euromoney: Odds of September Fed Tapering Appear to be Ebbing

By    |   Friday, 13 September 2013 08:19 AM

September tapering by the Federal Reserve is no sure thing, according to Euromoney, which elaborates on the view that the U.S. economic snapshot is of a glass half-empty rather than half-full.

Euromoney said "downside risk factors" for tapering the Fed's $85 billion monthly bond-buying program are actually mounting.

"The prospects for tapering are being buffeted by risks ranging from disappointing economic data on jobs and interest rate-sensitive sectors, such as housing, and the deadlock in Washington over the debt ceiling, to worries over possible military action against Syria."

Editor’s Note:
Obama Donor Banned This Message (Shocking)

Meanwhile, other G20 nations, the International Monetary Fund and leading academics are clamoring that tapering will worsen the already-steep financial difficulties in emerging markets.

In addition, Euromoney said, third-quarter U.S. GDP growth is likely to come in at a weak 1.7 percent, mortgage rates are surging and capital good spending and housing are starting to slow.

"A possible geo-political event in the Middle East, the budget stalemate on cutting the deficit or raising the debt ceiling and how fear of tapering is affecting interest rate sensitive areas of the economy mean it could very well be that it is deferred until perhaps December," said Peter Lowman, chief investment officer of Investment Quorum.

However, John Higgins, Capital Economics' chief markets economist, told Euromoney that the view that the Fed will start tapering in September has already impacted interest rate expectations.

"Providing the Fed interprets these rising Treasury yields as consistent with the gradual improvement in the economy, it's not going to act to restrain that," he predicted. "Unless the economy takes a material turn for the worse and the Fed feels that the upward pressure on bond yields was not justified, then I can't see it postponing its plans to taper.

Frances Hudson, global thematic strategist at Standard Life, speculated the Fed might seek a compromise or sorts on tapering.

"We've got a strange situation where the market is discounting tapering, but the evidence doesn't seem to support a move now so they could deliver a token amount, reducing purchases by say $5 billion instead of $10 billion," she said.

A Reuters poll found a strong majority of 69 economists surveyed last week expect the Fed to trim its monthly spending on asset purchase by $10 billion and that it will announce the move in September.

"The markets have been so focused on September, I think they have to do at least a nominal taper. They might do something small that would be more symbolic than substantive," predicted Richard Moody, chief economist at Regions Financial.

Editor’s Note: Obama Donor Banned This Message (Shocking)

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September tapering by the Federal Reserve is no sure thing, according to Euromoney, which elaborates on the view that the U.S. economic snapshot is of a glass half-empty rather than half-full.
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2013-19-13
Friday, 13 September 2013 08:19 AM
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