Fed to provide clues on bond buying tapering next month

Experts expect the Federal Reserve to announce its plan to wind down its ultra-loose monetary policy measures launched in response to the Covid crisis next month.

Nearly two thirds of economists polled by Reuters think the US central bank will outline how it will taper its asset purchases at the next meeting of the Federal Open Market Committee in September.

The Fed currently buys $80bn and $40bn of Treasuries and mortgage-backed securities each month respectively through its bond purchases programme.

The change in tone has been triggered by a better-than-expected jobs report released last week showing the unemployment rate unexpectedly plunged to 5.4 per cent in July.

The Fed has previously said it will not budge on its accommodative position until the American labour market is in robust health and nearing full employment.

However, more than a third of respondents said the FOMC will wait until November or December to outline its plan.

Jim O’Sullivan, chief US macro strategist at TD Securities, said: “I know some Fed officials are pushing for it to happen at the September meeting, but that is very unlikely.”

None of the respondents said the plan would be announced at the Fed’s central banking conference in Jackson Hole, Wyoming, this month, compared with the more than one-quarter who said in a June poll that it would.

Experts also think the jobless rate would hover around 3.1 per cent next year, and then gradually fall over the next two years.