Tuesday, September 24 14:44:55
An influential Federal Reserve policymaker said he "certainly wouldn't want to rule out" a reduction in the U.S. central bank's bond-buying program later this year, adding the Fed now expects slower economic growth than it did in June.
The decision "depends on the data," New York Fed President William Dudley said in a Monday interview aired on CNBC today. "The thing that we really want to emphasize is that it's driven by data, not by time."
Dudley, a close ally of Fed Chairman Ben Bernanke, repeated however that a plan that Bernanke articulated in June to wind down the quantitative easing (QE) program remained "intact." The plan was to reduce QE later this year and to end it by about mid-2014 as long as the economy keeps improving as expected.
The sometimes mixed messages from Fed officials in the last few days have left investors guessing. U.S. stock index futures were little changed early Tuesday.
Back in June, U.S. Treasury bond markets fell sharply when Bernanke unveiled the timeline for the year-old program in which the Fed buys $85 billion in Treasury and mortgage bonds each month to boost the slow U.S. economic recovery.
Investors and economists widely expected the Fed to reduce the pace of QE at a meeting last week, but policymakers decided to leave it unchanged, sparking a global rally in bonds and stocks. The Fed cited fiscal constraint and tight financial conditions, including in mortgages, in its shock decision.
Dudley said Bernanke's plan was based on the Fed's June economic forecasts; last week, the Fed lowered its expectations for 2013 and 2014 growth.
"So if the economy were behaving in line with the Fed's June forecast then it's certainly likely that the Fed would taper later this year," Dudley said. "But whether that's going to happen or not remains uncertain." ( C ) Reuters