US Fed is likely to begin tapering of asset purchases sooner rather than later. The announcement of rolling back stimulus is likely on FOMC meeting scheduled for September 18.
Kevin Cummins, US Economist at UBS Macro Research analysed Fed minutes and outlook for US economy. According to him the US Fed is likely to begin tapering of asset purchases sooner rather than later. The announcement of rolling back stimulus is likely in September.
Below are the excerpts of his interview on CNBC-TV18
Q: What do you make of this week; we have heard all kinds of different signals coming out of the Fed?
A: I think the underlying message from the minutes, summed up the idea that the Fed is likely to begin tapering asset purchases sooner rather than later.
Q: How sooner is sooner?
A: They announced that they will begin to dial back on the amount of purchases at the September 18 Federal Open Market Committee (FOMC) meeting. The purchase plan right now, in-place is based on the economic data. However, given the kind of backdrop that we have with an improvement in labour market that was reported a week ago; it is pretty much consistent that as long as the data do not show any significant signs of weakening, it is safe to assume that in September will be the announcement.
Q: What do you make of the data because the last few weeks we have been using both the disappointing gross domestic product (GDP) number as well as that very encouraging jobs number that we saw last week as contrasting indications of a very difficult to tell economic situation in the US?
A: The GDP data isn't that helpful to gauge the underlying strength in the current economy, and we are going to be getting the first testament of Q2 GDP at the end of July. Therefore, that will be telling us what activity happened in April-May and June. For most of the monthly indicator such as the monthly employment report tell look at how things are going.
So, GDP is adding up to a much softer than the sort of job growth we have seen, would imply but it probably suggest that productivity growth is either declining or very weak in the second quarter.The Great Diwali Discount!
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