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• Our baseline scenario is that Fed officials will likely taper the monthly rate of its asset purchases at the upcoming September 17-18 FOMC meeting.
• We believe that the unemployment rate will continue its downward trend, with demographic factors offsetting any cyclical rebound in the participation rate.• Downside risks to US growth have diminished since the fall, and we expect real GDP growth to start picking up momentum towards the end of the year as the fiscal drag gradually diminishes.
• The Fed will likely embark on a modest taper, whereby Treasury purchases are reduced from $45bn to $35bn per month and MBS purchases are either held steady at $40bn per month, or reduced to $35bn per month...