Fiscal Issues Will Prevent Fed to Taper in September – FT

As I said in different posts (1, 2, 3), FT noted yesterday that fiscal divisions could prevent Fed to taper in September. Even if a minority of economists believe the fiscal environment could contribute to a delay in the first tapering move, divisions between Republicans and Democrats have widened since several weeks heightening the risk of a possible government shutdown as early as October 1.

 

More from FT:

 

The growing threat of a political stand-off over fiscal policy in Congress could limit the Federal Reserve’s drive towards slowing asset purchases in the coming months, some economists say.
 
US central bank officials are weighing a tapering of bond buys as early as the next meeting of the Federal Open Market Committee on September 17-18 and are expected to approve such a move as long as the economic data remain relatively strong.
 
But while figures on employment, inflation, factory activity and housing are expected to be the main drivers of the Fed’s decision, officials will also be monitoring developments on Capitol Hill. Divisions on fiscal policy between Republicans and Democrats have widened, heightening the risk of a possible government shutdown as early as October 1, and even a crisis over raising the US borrowing limit between mid-October and mid-November, possibly leading to another brush with a debt default.