Wall Street firms see Fed tapering bond buys starting next year By Reuters

Wall Street firms see Fed tapering bond buys starting next


© Reuters. FILE PHOTO: U.S. Fed Chairman Jerome Powell arrives on Capitol Hill in Washington

SAN FRANCISCO (Reuters) – Wall Street firms expect the Federal Reserve to start paring back its bond-buying next year, and phase it out completely by the second half of 2023, the New York Fed’s latest survey of primary dealers shows.

The Fed has since June said it will buy “at least” $120 billion a month in Treasuries and mortgage-backed securities “over coming months,” but has not given any precise guidance on its asset-purchase plans. It has bought about $3 trillion since the start of the crisis to help stabilize financial markets and boost the economy.

The survey, whose results were shared internally at the central bank ahead of its September policy meeting and released publicly on Thursday, shows banks expect the Fed to begin trimming MBS purchases in the first half of 2021, and by the second half to have pared total purchases to $84 billion a month, on average.

The Fed is expected to taper purchases further in 2022, to a monthly average of about $25 billion by the second half, according to the survey.

Those expectations contrast with investor speculation that the Fed may need to boost bond-buying at some point to help the recovery along.

They also seem at odds with the Fed’s own guidance on keeping monetary policy super easy for years to come.

Last month the Fed said it will not raise interest rates until the economy is at full employment and inflation has reached and looks set to exceed 2%, a process policymakers signaled they think will take until at least 2023.

Bank expectations before the meeting appeared to be already in line with that new guidance. Interest rates, banks said in the survey, would begin to rise only in the second half of 2024.

The presidents of both the Kansas City Fed and the Chicago Fed this week said the Fed should be more explicit about future asset purchasing plans, though minutes of the Fed’s most recent meeting show that most of their colleagues have no problem with the guidance as it stands.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *


About us

InvestLab is a financial services technology company focused on the global trading market. Founded in 2010 in Hong Kong, the company develops trading, market data, and social research products that enable individual investors and small to mid-size brokers to access global markets. We provide brokers and financial institutions cross border capabilities for retail investors into 43 markets globally.


CONTACT US

CALL US ANYTIME