Fed Could Taper by $10 Billion Next FOMC

he Federal Reserve is expected to cut its bond-buying program by a further $10 billion on Wednesday as signs mount that the U.S. economy is starting to pull away from its winter slowdown.

Janet Yellen’s second policy-setting session as Fed chair should confirm the central bank’s plan to wind down its purchases of Treasuries and mortgage-backed securities by year-end – a sign of its confidence the economy is gaining traction.

The reduction likely to be announced at the end of the Fed’s two-day meeting would bring the total monthly purchases down to $45 billion, split between $25 billion of Treasuries and $20 billion of mortgage-backed securities.

But analysts expect little more out of the session as the Fed enters what may be a sort of holding pattern as it transitions from an era of crisis response to one of more normal monetary policy.

The meeting “will probably be a quiet one,” with the reduction in purchases “a foregone conclusion,” and no fresh economic forecasts from the members of the Fed’s policy-making committee, said Goldman Sachs senior economist Kris Dawsey.

A statement outlining the policy decision and the Fed’s view of the economy will be issued at 2 p.m. EDT.

Little or no change is expected in the Fed’s guidance on its key overnight interest rate, which it has kept near zero since the depths of the financial crisis in December 2008.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza