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Will the Feds Be Winding Down Economic Stimulus in 2014?

Punit Paranjpe/AFP/Getty Images

Business economists believe the Federal Reserve will dial down its stimulus policies in the first half of 2014, according to a November survey by the National Association of Business Economists.

President Barack Obama, Federal Reserve Chairman Ben Bernanke and Janet Yellen, the president's choice choice to succeed the current Fed chairman. (Getty Images)

The survey of 51 economists also found that the majority of business economists believe the United States' economy will accelerate by the second quarter of 2014.

Of those surveyed, approximately 62 percent said they believe the Fed will retire its $85 billion bond-buying program in the first quarter of 2014. Meanwhile, 30 percent of respondents said they believe the Fed will draw down its bond-buying program in the second quarter of 2014.

But regardless of the exact quarter, the final message is the same: Nine out of 10 economists surveyed by NABE believe the Fed will end its fourth round of quantitative easing (also known as QE4), which has gone untouched since it was first announced in December 2012, in the first half 2014.

The Federal Reserve’s $85 billion a month bond purchases are supposed to keep interest rates low and stimulate the economy.

NABE’s findings come after many were surprised earlier in 2013 when the Fed decided against reducing its bond purchases in September. The Fed said at the time that it would hold off on changing its policies until it was satisfied that the U.S. economy could stand on its own two feet. The Fed has repeatedly said that it would like to see the U.S. employment rate fall to 6.5 percent before backing away from its stimulus policies.

The NABE survey also found that economists are confident the economy will grow at a faster and more robust clip than it did in 2013. The U.S. economy is predicted to grow at a 2.8 percent annual rate in 2014 as opposed to the expected rate of 2.1 percent for 2013.

NABE explained that 2013’s annual rate can in some way be blamed on the 16-day partial government. Seventy-three percent of NABE respondents said the shutdown hindered U.S. economic growth in the fourth quarter by at least 0.5 percent or less.

However, this would seem to contradict a recent Federal Reserve survey that found the shutdown had little to no affect on the economy.


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