ARLINGTON, Va. — Don't look for the Federal Reserve to begin its tapering process this year.
That's the call of NAFCU Chief Economist David Carrier, who does not expect the Fed will announce it is reducing its bond buying during the Federal Open Market Committee two-day meeting that begins Wednesday.
Carrier predicts the Fed will wait until early 2014 to begin tapering asset purchases. Citing recent NAFCU Macro Data Flash reports on the consumer price index, employment numbers and the GDP, Carrier explained that the long-awaited beginning of tapering may be delayed until next year.
"Although the unemployment rate dropped to 7% last month, there is more to the employment picture than the unemployment rate," Carrier said. "The Fed is probably also looking for consistent job growth of around 200,000 per month — because that's what it would take to have a sustained reduction of the unemployment rate to the 6.5 percent threshold."
Carrier cited the Fed's "dual mandate" — employment and inflation — to begin cutting bond buying. Carrier said the Fed has stated inflation must average 2% and a consistent pattern in labor force growth must be present before a change is made. Carrier said inflation will not reach 2% soon and that the country's employment situation is still "muddied."
