QE taper: what does economy say?
According to Reuters forecast, majority of economists expect the Fed to start tapering QE in March. Still, the recent positive economic figures out of the US create room for doubts.
What exactly do we mean by “positive economic figures”? Analysts at BK Asset Management did a great job by systematizing these figures:
Health of consumer sector: FOR tapering
Labor market: FOR tapering
Inflation: AGAINST tapering
Housing market: neutral
Manufacturing sector: neutral
Growth: FOR tapering
Market indicators: FOR tapering
BK thinks that the Fed will announce small amount of tapering this month ($5 to $10 billion), but won’t commit to further reductions for now, so that the next Chairman Janet Yellen got flexibility for her policymaking. 10-year Treasury yields rose, but are below their September highs, so the market has probably priced in tapering this month or next, but didn’t price in the end of QE next year.
Photograph: Jonathan Ernst/Reuters