The two-week government shutdown means that the Fed is almost certain to leave the pace of its monthly asset purchases unchanged at its two-day FOMC meeting, which concludes on 30th October. The conventional wisdom is that the Fed could now delay its tapering until at least next March. Given the weakness evident in September's employment figures, we agree that a move at December's FOMC meeting is now off the table. (Indeed, it is not outside the realms of possibility that one or two Fed officials could soon push for an increase in the pace of asset purchases.) We agree that March is now the most likely date for the Fed to begin winding down QE3, but the ongoing fiscal uncertainty could force it into an even longer postponement.
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