NEW YORK - The vast majority of business economists believe the Federal Reserve will begin to pull back on its extensive economic stimulus program in the first three months of 2014, according to a November survey done by the National Association of Business Economists.
The survey also showed a majority of economists believe the United States’ economic recovery will accelerate next year.
The association surveyed 51 economists between Nov. 8 and Nov. 19 and found that 62 percent of respondents believe the Fed will pull back on its bond-buying program in the first quarter of 2014. Another 30 percent believe the Fed will begin to reduce its bond-buying in the second quarter of 2014.
Combined, nine out of 10 economists believe the Fed’s stimulus program will wind down next year, after being place in its current form since December 2012.
The Federal Reserve has been buying $85 billion in bonds each month in an effort to keep interest rates low and stimulate the economy. The central bank widely was expected to taper its bond purchases in September, but decided to wait and see more evidence whether the nation’s economic recovery is sustainable.
In its survey, the association said its forecasters expect the U.S. economy will grow faster next year than in 2013. The organization forecasts that the country’s economy will grow at a 2.8 percent annual rate in 2014versus the 2.1 percent annual rate it is expected to grow this year.
The partial shutdown of the federal government in early October likely had a modest effect on economic growth, the association said.
Of the forecasters polled, 73 percent said that the October shutdown likely reduced U.S. economic growth in the fourth quarter by 0.5 percent or less. Fewer than 25 percent of economists believed the shutdown had no effect on the U.S. economy or even helped the U.S. economy.
Federal Reserve Bank of St. Louis President James Bullard, who votes on policy this year, said Monday that the odds of tapering bond purchases have risen along with gains in the labor market, and any reduction should be modest to account for low inflation.
“A small taper might recognize labor-market improvement while still providing the committee the opportunity to carefully monitor inflation during the first half of 2014,” Bullard, a supporter of record stimulus, said in St. Louis. “Should inflation not return toward target, the committee could pause tapering at subsequent meetings.”
“Based on labor-market data alone, the probability of a reduction in the pace of asset purchases has increased,” Bullard said in the text of remarks to the CFA Society of St. Louis.
“To the extent that key labor market indicators continue to show cumulative improvement, the likelihood of tapering asset purchases will continue to rise,” Bullard said. “The committee’s 2012 criterion of substantial improvement in labor markets gets easier and easier to satisfy on a cumulative basis as labor markets continue to heal.”
U.S. employers added more workers than forecast last month, and the unemployment rate fell to a five year low of 7 percent, the Labor Department said last week. The Fed has pledged to press on with bond-buying until the outlook for the job market has “improved substantially.”
Bullard, noting inflation is well below the Fed’s 2 percent target, has in the past urged the Fed to hold off on reducing its asset purchases or raising interest rates. Instead, he has proposed that the Fed pledge not to raise the benchmark interest rate if inflation is below 1.5 percent.
Information for this article was contributed by Ken Sweet of The Associated Press and Steve Matthews of Bloomberg News.
Business, Pages 23 on 12/10/2013