The Atlanta Journal-Constitution
Fed’s bond buying likely to taper till ’22, economists say
Support for economy, vaccine distribution bolster forecasts for 2021.
Federal Reserve officials meeting next week are likely to put off any changes in their bond-buying program until 2022, when a tapering of purchases may begin, according to economists surveyed by Bloomberg News.
About 88% of the 40 respondents to a Jan. 15-20 questionnaire said the Federal Open Market Committee’s next move will be to shrink purchases gradually rather than to increase their pace.
The FOMC has its first meeting of 2021 on Tuesday and Wednesday, a week after the inauguration of President Joe Biden, who is asking for $1.9 trillion in additional fiscal stimulus to help the coronavirus-ravaged economy. More support, on top of the $900 billion package signed into law by former President Donald Trump, has boosted prospects for growth and inflation, while improving the outlook for unemployment, according to the survey.
The distribution of two vaccines in the U.S., stronger fiscal help following Democrats taking control of the Congress and continued monetary support have led some investors to raise their economic forecasts for this year. The 10-year U.S. Treasury yield has risen this month to its highest level since last March.
“The release of pent-up demand, powered by monetary and fiscal policy, pushes the risks for both growth and inflation on the upside in the second half of 2021 and 2022,” economist Lynn Reaser of Point Loma Nazarene University said in a survey response.
Many of the economists surveyed said they have altered forecasts in light of the fiscal stimulus, with virtually all of them raising their outlook for economic growth, which includes government spending. More than half said the extra funding would influence their unemployment forecasts and almost 50% said it would cause a shift in their 2021 yearend inflation estimates.