In September, we’ll likely see the culmination of three major economic policy storylines that have been building in recent weeks and months.
First and foremost on the minds of financial market participants is the Federal Reserve’s monetary policy meeting on September 18, upon conclusion of which the FOMC is expected to announce a reduction in the pace of its monthly bond purchases to $65 billion.
(The central bank has been buying $85 billion of bonds every month since September 2012, and hints that it may begin to taper the pace of these purchases beginning this September caused a big sell-off in the Treasury market in May and June.)
Another issue that has taken the media by storm in recent weeks is who President Obama is likely to nominate to replace Fed Chairman Ben Bernanke when his term expires in January. Two candidates – current Fed Vice Chair Janet Yellen and former U.S. Treasury Secretary Larry Summers – are thought to be the frontrunners.
While relatively little is known about Summers’s stance on monetary policy, Yellen is an outspoken advocate of the Fed’s current course of action.
Last week, Bloomberg reported that Obama won’t be ready to nominate a Bernanke replacement until at least September, so we could hear something on this front as well.
Meanwhile, Obama is also facing an upcoming showdown with Republicans over the continuing resolution that has allowed the government to fund itself this year.
The resolution expires October 1, when fiscal year 2014 begins. If Congress can’t come to an agreement on how to continue to fund themselves by then, a partial government shutdown will go into effect.
Obama is already taking pre-emptive action in a series of public speeches designed to frame the upcoming debate.
Not long after that, Congress will need to raise the debt ceiling again.
Between tapering, the Fed nomination, the budget, and the debt ceiling, we’ll see a pretty remarkable confluence of macroeconomic events in the coming months.
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