Fed set for more stimulus tapering

Federal Reserve policymakers are holding their two-day monthly meeting, with the financial markets focused on whether they will further scale back monetary stimulus.

The feeling among economists is that the Fed will announce a further $10 billion cut in its bond buying at the end of the meeting.

Last month they reduced the amount that is being pumped into the US economy from $85 billion to $75 billion a month.

Outgoing Chairman Ben Bernanke has said the bond-buying programme is likely be completely wound down by later this year, as long as the US economy and labour market continue to improve.

That thinking is not likely to change even in the face of a brutal sell off of emerging market assets in places like Turkey, Argentina and India.

Though the central bank’s 16-month-old bond-buying is meant to boost the US economy, in the past it has lifted currencies and stocks in emerging markets that have benefited from a rush of international investment and the resulting lower interest rates.

When the Fed signalled it intends to wind down the unprecedented policy accommodation, those markets – especially in countries with large current account deficits – dropped hard.