WASHINGTON (AP) — An Associated Press survey finds most economists think the Federal Reserve is spot-on about beginning to slow its bond purchases later this year if the economy continues to strengthen.
The economists say sinking stock and bond prices after the Fed’s signal are happening because investors got spooked after being caught off guard.
Economists say that in the short run, traders fear that higher long-term rates could result, slowing growth. The economists say investors also feel that the Fed might be moving too fast to slow its stimulus. Some also think investors perceived a shift in the Fed’s timetable for curtailing its low-rate policies.
The Fed has said it plans to keep its benchmark short-term rate near zero at least until the unemployment rate reaches 6.5 percent. It’s now 7.6 percent and could reach its goal as early as the end of next year.