Courtesy of Benzinga.
It has been the talk of this spring and continues to make headlines leading into the summer. When will the Fed end its QE3 acquisition phase? How will the economy react?
In an article written by Ann Saphir of Reuterss, John Williams, president of the Federal Reserve Bank of San Francisco, gives a positive outlook on the economy. Williams stated that, “We could reduce somewhat the pace of our securities purchases, perhaps as early as this summer. Then, if all goes as hoped we could end the purchase program sometime late this year.”
According to CNBC the central bank currently buys $85 billion of Treasuries and mortgage-backed securities each month in an attempt to boost growth and reduce unemployment. The Fed has vowed to continue this effort until there is “substantial improvement” in the labor market outlook.
Williams is currently bullish on the outlook of the economy and predicts that U.S. GDP will grow by 2.5 percent for this year and by 3.25 percent for next year. He also estimates that the unemployment rate will fall below 7.5 percent for the year and will hover around 7 percent for the following year.
Williams went on to say that “If we [The U.S. economy] were in a car, you might say were motoring along, but well under the speed limit. We may not be getting there as fast as we’d like, but we’re definitely moving in the right direction.”
Williams attributes the slowed pace of the U.S. economy to tighter fiscal policy and the recent recessions of Europe. Although John Williams and others in the Fed are optimistic, he still believes that the unemployment won’t fall below 6.5 percent until 2015.
