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Fed-watchers are pretty sure they know what the word on a Fed taper will be when the official announcement comes following the Federal Open Market Committee (FOMC) meeting today and tomorrow (Wednesday)…
Wait a while longer.
While the U.S. Federal Reserve has hinted several times in the past six months that it is considering cutting back on its monthly purchase of $85 billion in bonds and mortgage-backed securities (known as quantitative easing, or QE), most expect no Fed taper in the immediate future.
It just doesn't make sense.
And the Fed historically has resisted making any disruptive policy moves in December, as they know trading is winding down for the year.
On that score, unemployment has improved to 7% (the Fed has said it would like to see it fall to 6.5%), and there's been a pop in the gross domestic product numbers to 3.6% as well as better November retail sales.
But inflation remains below the Fed target of 2%. The consumer price index (CPI) is 1.2%, and the measure the Fed prefers, the personal consumption expenditures index, is just 0.7%.
All that said, a Bank of America Merrill Lynch survey of fund managers showed a paltry 11% expect a QE taper from the FOMC meeting today.
So if the Fed begs off a QE taper this week, when might we see it?
In the survey of fund managers, 32% expected a January taper and 42% expected a March taper.
But given Yellen's extremely dovish views, the Fed taper may be much farther into the future…