The US Federal Reserve will delay the first reduction in its bond purchases until March after the government shutdown slowed fourth-quarter growth and interrupted the flow of data, economists said.
Policymakers will pare the monthly pace of asset buying to US$70 billion from US$85 billion at their meeting on March 18 and March 19, according to the median of 40 responses in a Bloomberg News survey of economists.
The 16-day budget impasse in Washington reduced growth by 0.3 percentage point this quarter, economists said in the survey.
Forecasters, surprised when the Fed opted against tapering at its meeting on Sept. 17 and Sept. 18, pushed out their expectations after the shutdown furloughed as many as 800,000 federal workers.
The closing also disrupted collection and publication of economic reports the Fed says it needs to determine whether the expansion is strong enough to handle less monetary stimulus.
“It’s going to be harder to extract the signal from the data, and the Fed’s policies are tied to the data,” said Laura Rosner, a US economist at BNP Paribas SA in New York and a former researcher at the Federal Reserve Bank of New York who expects the first tapering in March.
“They’re waiting for more confirmation the economy is moving in the direction of their outlook, and if we don’t have data or it’s inconclusive, then the Fed isn’t going to feel confident enough in the outlook,” Rosner added.
The US central bank will reduce monthly purchases to a US$25 billion pace by July next year and end the program at the meeting in October next year, according to the survey conducted this week.
Fed Chairman Ben Bernanke’s second term ends Jan. 31 next year and US President Barack Obama has nominated Fed Vice Chairman Janet Yellen to succeed him.
Economists had expected the central bank to reduce purchases to US$80 billion last month, according to a Bloomberg survey.
“Conditions in the job market today are still far from what all of us would like to see,” Bernanke said at a press conference following last month’s meeting.
Economists after that focused on December as the most probable date for the Fed to begin reducing the purchases.
Twenty-four of 41 economists in a survey last month identified the central bank’s December meeting as the time to taper.
That was before the government shutdown, which was resolved this week when Obama signed legislation opening the government until Jan. 15 next year and suspending the nation’s debt limit through Feb. 7 next year.
Chicago Fed President Charles Evans, an outspoken advocate of pressing on with stimulus, said the central bank should not begin reducing the pace of asset purchases with unreliable numbers.
“Only the data can tell us how much progress we’ve made, and they aren’t saying much right now,” Evans said on Thursday in a speech in Madison, Wisconsin.
“Data available in September were inconclusive, and since then incoming information has been silenced with the federal government shutdown,” he said.
Even Dallas Fed President Richard Fisher, who has called for reducing asset purchases, said fiscal discord has undermined the argument for tapering.
“Across the board — Fisher to Evans — they’re saying tapering is further down the road than it might have been if we hadn’t had the shutdown,” said Michael Hanson, senior US economist at Bank of America Corp in New York and a former Fed economist.
If the data are “impaired from the shutdown,” policy makers may wait until January to begin reducing purchases, he said.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last