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Mortgage Time
Fed May Taper Soon
Stronger than expected economic data and progress on a budget deal in Congress caused investors to move forward their expected timing for the Fed to begin to scale back its bond purchases. This hurt both stocks and bonds, and mortgage rates ended the week a little higher.
Fed officials have revealed several conditions which will help them determine when to reduce their bond purchases. Recent economic events and comments from Fed officials suggest that those conditions may have been met. The performance of the economy may be sufficient to make Fed officials comfortable reducing the level of monetary stimulus. A broad range of recent economic reports revealed gains in the labor market, GDP growth, Retail Sales, and manufacturing. In addition, Congress moved closer this week to reaching a two-year budget deal. The proposed deal would reduce the level of uncertainty about fiscal policy, which is another concern of Fed officials. As a result, investors expect the Fed to announce in the near future that it will begin to taper its bond purchases, and some think that it may take place as soon as next Wednesday's Fed meeting.