Economists See Fed Ending Bond Purchases Soon

Fed Chair Janet Yellen News Conference Following Federal Open Market Committee Meeting
Andrew Harrer/Bloomberg via Getty ImagesFederal Reserve Chair Janet Yellen
WASHINGTON, D.C. -- With the pace of U.S. economic growth seen speeding up later this year and next, many business economists expect the Federal Reserve to end its bond purchases this fall or even earlier.

The consensus of the 48 economists surveyed by the National Association for Business Economics is that bad weather cut first-quarter growth to a weak annual rate of 1.9 percent, but that growth could exceed 3 percent by year's end. NABE's report, released Monday, covered a survey period from Feb. 19 through March 5.

Their forecast for average U.S. economic growth of 2.8 percent this year is better than the 2.5 percent rate they predicted in NABE's December survey. Those surveyed expect consumer spending to now increase 2.6 percent in 2014, not 2.4 percent, as hourly wage growth is forecast to rise faster than inflation. GDP is expected to grow an average 3.1 percent in 2015.

"Conditions in a variety of areas -- including labor, consumer and housing markets -- are expected to improve over the next two years, while inflation remains tame," NABE President Jack Kleinhenz, chief economist of the National Retail Federation, said in a statement.

Given the stronger growth forecast, 57 percent of the economists surveyed believe the Federal Reserve will end its bond purchases in the fourth quarter, as the central bank has signaled it plans to do. Another quarter think it will happen even before that, though 17 percent think the Fed will keep buying bonds into 2015.

The Fed has been buying bonds for the past several years with the aim of driving down long-term interest rates to stimulate spending and economic growth. Now that the economy is slowly but steadily improving, it has been tapering those purchases.
At each of its last three policy meetings, including last week's, the Fed cut bond purchases by $10 billion to the current pace of $55 billion a month. There are six meetings left in 2014.

One-third of respondents said the Fed could even raise short-term interest rates this year, though more than half think it won't happen until next year. Fed Chair Janet Yellen said Wednesday that with the job market still weak, the central bank intends to keep short-term rates near zero for a "considerable" time and would raise them only gradually. She also said the Fed wouldn't be dictated solely by the unemployment rate, which Yellen feels overstates the health of the job market and the economy.

Yellen appeared to jolt investors last week when she tried to clarify the Fed's timetable for raising the short-term rate. She suggested that the Fed could start six months after it halts its monthly bond purchases. That would mean the rate could rise by mid-2015. A short-term rate increase would elevate borrowing costs and could hurt stock prices. Stocks fell after Yellen's mention of six months. The Dow Jones industrial average ended that day down more than 100 points.


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scottee

when do the economists see The Fed submitting to an audit? to show the American people that they deserve our trust?

March 24 2014 at 10:55 AM Report abuse rate up rate down Reply
tmoschetti

"Economists See Fed Ending Bond Purchases Soon"

Did you mean that economists project the corrupt fed will soon stop artificially propping up the markets to lend a hand to the most economically illiterate president since FDR, our first Socialist president.

I guess it's no longer "it's the economy, stupid," but rather "it's the stupid fed, stupid!" One day their house of cards is going to come crashing down on us, but not them of coiurse!

March 24 2014 at 10:49 AM Report abuse +1 rate up rate down Reply
1 reply to tmoschetti's comment
scottee

yes, you have to read between the lines :)

March 24 2014 at 10:56 AM Report abuse rate up rate down Reply
tmlbtb

Un-employment might be coming down, but the jobs people are taking won't float the economy. What? All of a sudden middle-classs America has recovered? Think not! The economy won't bounce back without them.

March 24 2014 at 10:43 AM Report abuse +1 rate up rate down Reply
1 reply to tmlbtb's comment
scottee

One hundred senators, 435 congressmen, one president and nine Supreme Court justices - 545 human beings out of the 316 million - are directly, legally, morally and individually responsible for the domestic problems that plague this country. and we keep re-electing 90% of them while they have a 5% approval rating...why? and we pay them six figures and benefits for life...why????

March 24 2014 at 10:57 AM Report abuse rate up rate down Reply
pgile

This isn't the government saying the economy is getting better. It's economists employed by companies who have no great love of this administration. With budget deficit expected to be down by nearly 60% since the depths of the great recession and unemployment heading toward 6%, surely only those with blinders on and irrational hate for the Obama administration can say economy hasn't recovered. Ending bond purchases will be a good thing. So will continued haggling over fed spending (as long as not irrational). Now if the admin. would only take a look at long-term entitlements (esp. SS and Medicare) we could go beyond recovery to sustainable growth and some relief to long-suffering "middle class".

March 24 2014 at 10:29 AM Report abuse +1 rate up rate down Reply
2 replies to pgile's comment
tmoschetti

When isa the last itme you saw the fed ARTIFICIALLY keeping interest rates historicsally low in a growing economy? The real unemployment rate is closer to 9% if you count all of those actually unemployed.

You must have also believed your Messiah when he said that you can keep your healthcare plan if you like, and that your premiums would be heading DOWN!!\ Oh, and I don't mean the premium that you pay, I mean the premium that the taxpayer has helped approximately 80% of those enrolled through Feb!
I guess it depends on the meaning of DOWN!

March 24 2014 at 10:55 AM Report abuse rate up rate down Reply
scottee

One hundred senators, 435 congressmen, one president and nine Supreme Court justices - 545 human beings out of the 316 million - are directly, legally, morally and individually responsible for the domestic problems that plague this country.
When you fully grasp the plain truth that 545 people exercise power of the federal government, then it must follow that what exists is what they want to exist.

March 24 2014 at 10:57 AM Report abuse rate up rate down Reply