QE tapering expected only after September: TMB Analytics

business August 09, 2013 00:00

By The Nation

The US Federal Reserve may not decide to taper on the quantitative easing (QE) at its September meeting, given fragile economic recovery, TMB Analytics said.

The research house of TMB Bank said that though unemployment rate narrowed to 7.4 per cent, the recovery pace is not as solid enough to support the tapering.
The US economy expanded by only 1.7 per cent in the second quarter, while the first-quarter growth rate was revised down to 1.1 per cent. The 7.4 per cent unemployment rate could be distorted, as this does not include those who stopped searching for jobs. 
Given the growth in non-farm jobs by 160,000 a month (since February 2010), the joblessness should return to normal later than expected. 
"This is in line with our forecast that the QE tapering should take place very late of 2013," it said. 
It added that the inflation below 2 per cent could also encourage the Fed to maintain the easing policy, until inflation picks up.