23 Aug 2013
$15.0 billion QE deduction expected to begin in September
FXstreet.com (New York) - The paramount question bouncing around markets these days is not only if, but when the Fed will initiate its tapering program. However, a less asked question, which has slowly gained more popularity recently amidst the recent FOMC meeting is how to begin tapering, i.e. by what degree of Federal rollbacks in bond buying purchases.
A September to remember?
Primary dealers surveyed before the Federal Reserve's July policy meeting reported that they expected the US central bank to reduce its asset purchases by nearly $15.0 billion starting in September.
According to the survey conducted by the New York Fed, the median of responses showed that the dealers expected the Fed to keep buying $85 billion in bonds per month until a meeting scheduled for September 17-18. However, at that meeting, they expected policymakers to trim Treasury buys by $10.0 billion and mortgage-bond buys by $5.0 billion, for a total of $15.0 billion.
December target also of importance
Indeed, the dealers predicted that by December, the Fed would reduce its quantitative easing program, known as QE3, by an additional $15.0 billion, bringing the total size of the program to $55.0 billion per month. In an effort to induce investment and growth, the Fed currently purchases $45.0 billion in Treasury bonds and $40.0 billion in mortgage bonds per month.
The survey was done just before the Fed's July 30-31 meeting, at which point monetary policymakers decided to continue their asset-buying pace. A survey done before the previous Fed meeting however, shows that in June, dealers did not expect the first reduction in QE3 until December, a stark contrast to the September target now widely accepted. Time will tell which route the Fed will ultimately take, but the scale of reduction also seems to be another caveat to an ongoing game of cat and mouse with the FOMC and the US economy.
A September to remember?
Primary dealers surveyed before the Federal Reserve's July policy meeting reported that they expected the US central bank to reduce its asset purchases by nearly $15.0 billion starting in September.
According to the survey conducted by the New York Fed, the median of responses showed that the dealers expected the Fed to keep buying $85 billion in bonds per month until a meeting scheduled for September 17-18. However, at that meeting, they expected policymakers to trim Treasury buys by $10.0 billion and mortgage-bond buys by $5.0 billion, for a total of $15.0 billion.
December target also of importance
Indeed, the dealers predicted that by December, the Fed would reduce its quantitative easing program, known as QE3, by an additional $15.0 billion, bringing the total size of the program to $55.0 billion per month. In an effort to induce investment and growth, the Fed currently purchases $45.0 billion in Treasury bonds and $40.0 billion in mortgage bonds per month.
The survey was done just before the Fed's July 30-31 meeting, at which point monetary policymakers decided to continue their asset-buying pace. A survey done before the previous Fed meeting however, shows that in June, dealers did not expect the first reduction in QE3 until December, a stark contrast to the September target now widely accepted. Time will tell which route the Fed will ultimately take, but the scale of reduction also seems to be another caveat to an ongoing game of cat and mouse with the FOMC and the US economy.