Bloomberg survey economists expect that the U.S. Federal Reserve Board will reduce the size of bond purchases in the fourth quarter.
According to economists interviewed by Bloomberg, the U.S. Federal Reserve Board (Fed) is expected to begin tapering its monthly bond purchases of $120 billion by the end of this year.
This is slightly earlier than the time predicted in the March survey, but the Fed will remain unchanged for several months, and the first interest rate hike will not be before 2023. In contrast, the Bank of Canada said last week to reduce the purchase of government bonds and accelerate the schedule of interest rate hikes, although the European Central Bank met on April 22, the resolution to maintain the tools to deal with the crisis, will remain on hold.
The interview, about 45% of economists expect that the Federal Open Market Committee (FOMC) will be announced in the fourth quarter to reduce the size of quantitative easing (QE), 14% believe that the first three months will do so. The survey, which interviewed 49 economists, was conducted between April 16-21, and the results were hawkish compared to March, when more people thought QE would be scaled back in 2022.
The FOMC will conclude its two-day meeting on Wednesday, and is expected to reiterate that it will wait for the U.S. economy to make “substantial further progress” against employment and inflation targets before adjusting the scale of bond purchases, while the Federal Reserve will not raise the current benchmark interest rate target of zero to 0.25%. 2:00 pm EST. Federal Reserve Chairman Ball held an online press conference in 30 minutes.
Economists said they will watch the wording of the FOMC statement and Ball’s press conference to see if there are hints of a possible gradual reduction. Ball has said he will warn the market before the committee feels the target is in sight and policy may change, and that policy changes will depend on actual future economic suits, not just bullish forecasts.
Mirabaud Asset Management chief economist Gero Jung said, “Given the Fed’s insistence on focusing on ‘actual’ economic data, rather than expectations of an improvement in the situation, it is still too early to tell. We think the Federal Reserve would like to see a series of very positive data, such as March employment data. Then only start to start tapering QE”.
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