Why Ending QE3?

The Federal Reserve received today encouraging signals from the U.S. economy. The Consumer Price Index indicated a rise (0.5%) in the price of goods, mainly sustained by the higher cost of gasoline, fact confirmed by the Core Consumer Prices Index that was reported in line with expectations at 0.2% (the last index excludes the energy and food’s costs). It is important to see the inflation being kept under control but on the other side, low values of the index of prices are not much help for the economy. The industrial production has taken a balanced value, particularly sustained by more confident homebuilders. Since January 2006 the house building industry started to lose its pulse and now it seems that it may regain its rhythm.

The positive outlook was maintained by the speech of one of the FOMC members today. Even if the growing rate is not as high as expected, it is stable and represents the ground for the monetary policies that are implemented. If the economy is continuing at this pace, the tapering of QE3 is expected to start later this year with an end in the first quarter of 2014. Further improvements are expected especially in the job and housing market. It is important to remember the fact that United States is seriously affect by the global negative sentiment (recently, the IMF revised down its global growth projections) and the fact that economies like China are slowing down.