Even considering Friday’s weak August jobs report,
economists across Wall Streetexpect the Federal Reserve to announce later this month that it is tapering its monthly purchases of $US45 billion worth of Treasury bonds and $US40 billion worth of mortgage bonds.
But this consensus is based largely on economic analysis.
Of course, there is always the possibility that some “black swan” event or an escalation of geopolitical tension causes uncertainty to spike ultimately affecting economic forecasts.
One such risk: Syria.
From Credit Suisse’s latest “Global Economics Weekly Calendar” (emphasis added):
“In our view, absent missile strikes on Syria the very days the FOMC meets, there is little to keep the Fed from modestly reducing its particularly accommodative $US85bn/month easing program. We still look for a $US20bn taper, evenly distributed between MBS and Treasuries. This would reduce monthly MBS purchases to $US30bn and Treasury purchases to $US35bn. Our second favourite option is a $US15bn taper ($5bn MBS, $US10bn Treasuries), bringing monthly purchases of each to $US35bn.”
The Federal Reserve’s next two-day Federal Open Market Committee meeting ends on September 18.