No QE Tapering Expected From October Fed Meeting

rtU.S. stock futures are pointing to a higher opening on Monday as investors remain optimistic that the upcoming Federal Reserve meeting on Tuesday and Wednesday won’t reveal any new monetary policy changes with the Fed’s monthly $85 billion quantitative easing (QE) program.

Many economists were expecting the Federal Reserve to announce some form of “tapering” or reduction of its quantitative easing program during the September Fed meeting that occurred before the fiscal showdown in Washington D.C. and led to no “Grand Bargain” with only short-term fixes to the debt-ceiling and funding of the government that will likely resurface in early 2014.

Fed members decided against tapering in September and made it clear in their September policy statement that there are still downside risks to the economy and inflation remains well below their 2 percent target range.

Fed members acknowledged the rise in U.S. interest rates since May came from shifting expectations about their own monetary policy rather than robust U.S. economic growth.

“The move in interest rates appeared to be importantly influenced by shifting expectations about monetary policy” Fed members wrote.

Fed members also expressed some well placed concerns about the fiscal drag and future fallout from the fiscal debates.

“While downside risks to the outlook for the economy and the labor market were generally viewed as having diminished, on balance, since last fall, a number of  significant risks remained, including those related to the potential economic effects of the sizable increases in interest rates since the spring, ongoing fiscal drag, and the possible fallout from near-term fiscal debates.

Standard and Poor’s (S&P) released a new report that estimates at least 0.6 percent of U.S. fourth-quarter gross domestic product (GDP) growth or $ 24 billion USD was shaved off due to the government shutdown.

 

 

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