Fed Faces a Bond Tapering Decision Dilemma ahead of Next Week’s Meeting

Source: WSJ

The US Federal Reserve will use next week’s meeting to discuss when and how quickly to taper bond purchases as economic recovery picks steam.

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Fed officials are expected to receive formal staff briefings when they meet next week on how to go about the bond tapering.

Fed’s Powell is likely to build a consensus among policy makers on how to taper bond purchases, but the timing of the plans will reflect the economic performance.

Stronger economic recovery than expected has elicited questions on how to taper $120 billion monthly bond purchases.

The Fed has in the past hinted at maintaining rates from near zero level until the bond tapering is complete.

In December, Fed said it would maintain the current bond purchases until it achieves substantial progress of maximum employment and 2% inflation. 

Analysts expect the Fed to taper bond purchases and raise rates sooner than expected.