Tuesday, November 19, 2013

Roubini : Probably The Tapering will start in January

 You mentioned that you wouldn’t rule out the tapering of US Federal Reserve stimulus taking place in December. But when do you think it will actually happen and what actually backs your conviction?

Nouriel Roubini : Well, my baseline is that probably the tapering will start in January. That is more probable than December, but the latest economic data on the United States suggests that job creation remained robust in October in spite of the government shutdown. Other economic indicators in the US suggest that growth is picking up.

I would not rule out that the Fed might decide to start the tapering in December. It’s not my baseline because January is more likely. But even if they were to start in December, they would try to sweeten this bitter pill, firstly, by changing their forward guidance by signaling that they’re going to keep a zero policy rate for longer than otherwise. Secondly, they’re also going to make sure that people know that tapering and continuation of tapering are state-contingent or data-dependent.

The market at this point is already banking on the tapering happening. So it’s not going to be much of a surprise as it was in May or June. Long-term interest rates have already gone from 1.6 percent to 2.7 percent, so upside surprises in the long-term interest rates are going be relatively modest, whether tapering starts in December or in January. - in The Jakarta Post

Nouriel Roubini
Nouriel Roubini

Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
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