Fed to taper; continuity to depend on subsequent data: Pro

Capital account management conference organized by the Reserve Bank of India’s think tank CAFRAL or Centre for Advanced Financial Research and Learning in New Delhi highlights how to mange capital flows especially by the emerging markets.

After the US jobs data for the month of December came in lower-than-expected , experts believe the US Federal Reserve will hold on to its tapering programe for now but the continuity will depend on the subsequent jobs data going ahead.Also Read: RBI may pause rate hike on softer inflation: Acharya

Joseph Stiglitz, Nobel Laureate and Economist told CNBC-TV18 the tapering will be very mild. The US Fed is likely to keep the interest rates very low, close to zero until labour markets improve. “Given their focus on the labour market, the likelihood that interest rates will rise in 2014, is very small.

Adair Turner, former chairman, Financial Services Authority believes the tapering timetable will be maintained. ”Lot of people don’t make an adequate distinction between the reduction of the pace of increase of extra bonds owned by the Federal Reserve and its fund decisions, the policy interest rates,” he adds. He also believes that it is quite possible for the Fed to complete this year in-line with the stated program, the whole of tapering and stop buying more long term bonds.