Fed faces tough call on bond buying as economy strengthens
WASHINGTON (REUTERS) - The Federal Reserve will decide on Wednesday whether the US economy is finally resilient enough to withstand less policy support, or whether it is prudent to wait a bit longer.
With the world's financial markets on edge, the US central bank wraps up a two-day meeting with a highly anticipated policy announcement at 1900 GMT (3am Singapore time), followed by Mr Ben Bernanke's last news conference as Fed chairman a half hour later.
Recent growth in jobs and retail sales, as well as a fresh budget deal in Congress, has convinced a growing number of economists the time is right for the Fed to trim its US$85 billion (S$107 billion) in monthly bond purchases. The 15-month-old programme is meant to put downward pressure on long-term borrowing costs in order to stimulate investment and hiring. But many observers believe the central bank will wait until early in the new year, given persistently low inflation and the fact that the world's largest economy has stumbled several times in its crawl out of the 2007-2009 recession.
"It is increasingly looking like a coin flip," said Mr Michael Feroli, JPMorgan's chief US economist.