US GDP is growing at just 1-2% currently, but robust job growth and the conviction that the economy would be much stronger without fiscal restraint (set to be much less in 2014), looks like being enough for the Fed to announce a gradual QE tapering at the September FOMC meeting. Only very weak data in the next two months or an unexpected shock is likely to change that now. The Fed will not want bond yields to rise too fast so it will likely stress that rate hikes are not expected before H2-2015 and it may cut monthly asset purchases by only a small amount at first. Low inflation, modest earnings growth and the strong USD support a very gradual Fed move.
Posted on: Wed, 17 Jul 2013 09:17:56 +0000
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