Weaker data mean the Fed is unlikely to curb QE3 yet

The deterioration in the incoming economic data for March will, at least temporarily, prevent the Fed from slowing the pace of its monthly asset purchases. We anticipate that the Fed will stand pat at the upcoming two-day FOMC meeting that concludes on 1st May, although the statement is likely to reflect that weaker tone in the data. Further ahead, we still expect that the Fed will reduce the rate of its purchases from the current $85bn per month in the second half of this year, principally by curtailing its buying of long-term Treasury securities. The purchases will probably be stopped entirely sometime early in 2014.