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Fed unlikely to begin fund tapering, analysts say
October 30, 2013, 6:35 am

Wall Street reacted positively to expectations that the stimulus scheme will be continued [Getty Images]

Wall Street reacted positively to expectations that the stimulus scheme will be continued [Getty Images]

Citing the negative impact of the US government shutdown in early October on the health of the economy, many finance experts believe that Federal Reserve officials meeting this week will likely recommend that their quantitative easing stimulus programme continue.

In statements made several months ago, outgoing Fed Chief Ben Bernanke had set an unemployment rate of 7 per cent as a sign of a revived economy that would no longer require the stimulus regimen.

However, the US Bureau of Labour Statistics says that while the unemployment rate remains largely unchanged since August at 7.2 per cent, hundreds of thousands of people filed for unemployment benefits in the wake of the shutdown.

Figures revealed that it was the highest surge in unemployment benefit applications since November 2012.

There was also bad news in retail and consumer confidence. The Commerce Department registered a decrease in retail sales while the US Producer Price Index also fell short of expectations, the first downturn since April.

There was a much different reaction on Wall Street, however, on Tuesday as both the Down Jones Industrial Average and the S&P 500 closed with record highs.

Markets overseas are also likely to do good business if the Fed delays tapering – or ending of quantitative easing –  yet again.

On September 19, the Fed in a surprise move  announced it would not cancel the quantitative easing stimulus programme.

In late August, Indian Prime Minister Manhoman Singh said that the Fed’s tapering hurt the local economy. The Ministry of Finance and the Ministry of Commerce and Industry scrambled to contain the damage, with the latter setting up a task force to examine whether currency swapping with China could help the rupee’s free fall.

India also urged cooperation and support from its fellow BRICS members to come up with a common strategy to minimise the impact of tapering.

Source: Agencies

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