Nikhil Kumar: Don't expect the Fed to ease off on its bond-buying programme yet

Midweek View: Yes, things did improve, but instead of moving forward we seem to be moving sideways - that's what the figures suggest

It's an ongoing source of speculation on Wall Street: when will the policy sages inside the US Federal Reserve yank away the crutches that are keeping the world's largest economy on its feet? Every scrap of economic data, every release from the Fed, is read and re-read for hints, clues, winks, nudges – anything that might indicate when the central bank will roll back, or begin rolling back, its programme of purchasing $85bn (£56bn) of mortgage and government bonds every month.

In this spirit of crystal ball-gazing, what do the bank results so far tell us about what might happen? The March jobs report, which showed a sudden slump in the pace at which American employers are hiring new staff, suggested that the Fed would stick with the bond buys for now, fearing that too early a rollback could imperil the clearly weak recovery. The minutes of the last meeting of the central bank's policy-setting Open Market Committee, on the other hand, showed that some policymakers were eyeing the end of the year as the right time to begin rolling back the stimulus. They didn't say they would do it – but there was no masking the growing sense of unease about the potentially distorting effects of the bond buys.

But if the banking results are anything to go by, it might take a little longer. First, keep in mind the fiscal backdrop. Despite President Barack Obama's much-trumpeted budget "compromises" – trumpeted by the Democrats, that is – there is no sign of any agreement in Washington. The so-called "sequester" has already begun hitting far-flung corners of the country, and it doesn't look as though we'll see a deal on limiting its impact, at least not this year.

It's been like this for a while, and against this uninspiring background, the housing market has been a source of optimism for many. Despite all the wrangling in DC, it showed strength through 2012, so much so that JP Morgan's Jamie Dimon (pictured above) gushed that the market had "turned the corner". Home loans increased, and everything seemed to suggest that the US was building up to a recovery.

A few days ago, however, JP Morgan reported its numbers. Everything appeared to be well. In fact, the bank showed off record profits. "We are seeing positive signs that the economy is healthy and getting stronger. Housing prices continued to improve and new home purchases are also starting to come back," Mr Dimon said.

But then, later in his statement, he added: "The exception is that loan growth across the industry has been softer this quarter, although year-on-year growth remained strong. Small businesses remain cautious about the recovery and fiscal uncertainty, and are not investing their capital."

Then there were figures from Wells Fargo, the country's leading home lender. Again, we were given record top-line figures. But it was impossible not to notice that its mortgage machine had begun slowing.

As it happens, Citigroup, the third bank to post quarterly earnings as part of the current reporting round, probably did have reason to be the most positive. Its investment banking business showed strength, as did its mortgage business, and it set aside less money to cover bad loans. But Mike Corbat, the chief executive who took over after Vikram Pandit's sudden exit last year, was careful with his words. "I think the world continues to be somewhat of a fragile place and I expect the markets to remain volatile."

The updates, then, have the same fundamental message: yes, things did improve, and economic conditions are better; but instead of moving forward, we seem to be moving sideways.

Which suggests that Ben Bernanke and his colleagues at the Fed are not likely to roll back the central bank's bond-buying programme soon. Yes, the stimulus is probably having a distorting effect in parts of the economy, particularly the stock market. But it's a risk that, on balance, the central bank will probably live with, until it is convinced that businesses and consumers are strong enough to keep the economy on its feet.

For now, the Fed can take heart from the fact that both groups are stronger. But there is little to suggest that they are strong enough.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Guru Careers: Research Associate / Asset Management Research Analyst

£40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...

Ashdown Group: Finance Accountant - Financial Services - Central London

£30000 - £35000 per annum + benefits : Ashdown Group: Finance Accountant - Fin...

Ashdown Group: Chief Technology Officer (CTO) - Glasgow

£90000 - £98000 per annum + benefits : Ashdown Group: A truly exciting opportu...

Day In a Page

Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

Solved after 200 years

The mysterious deaths of 3,000 soldiers from Napoleon's army
Every regional power has betrayed the Kurds so Turkish bombing is no surprise

Robert Fisk on the Turkey conflict

Every regional power has betrayed the Kurds so Turkish bombing is no surprise
Investigation into wreck of unidentified submarine found off the coast of Sweden

Sunken sub

Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
Instagram and Facebook have 'totally changed' the way people buy clothes

Age of the selfie

Instagram and Facebook have 'totally changed' the way people buy clothes
Not so square: How BBC's Bloomsbury saga is sexing up the period drama

Not so square

How Virginia Woolf saga is sexing up the BBC period drama
Rio Olympics 2016: The seven teenagers still carrying a torch for our Games hopes

Still carrying the torch

The seven teenagers given our Olympic hopes
The West likes to think that 'civilisation' will defeat Isis, but history suggests otherwise

The West likes to think that 'civilisation' will defeat Isis...

...but history suggests otherwise
The bald truth: How one author's thinning hair made him a Wayne Rooney sympathiser

The bald truth

How thinning hair made me a Wayne Rooney sympathiser
Froome wins second Tour de France after triumphant ride into Paris with Team Sky

Tour de France 2015

Froome rides into Paris to win historic second Tour
Fifteen years ago, Concorde crashed, and a dream died. Today, the desire to travel faster than the speed of sound is growing once again

A new beginning for supersonic flight?

Concorde's successors are in the works 15 years on from the Paris crash
I would never quit Labour, says Liz Kendall

I would never quit party, says Liz Kendall

Latest on the Labour leadership contest
Froome seals second Tour de France victory

Never mind Pinot, it’s bubbly for Froome

Second Tour de France victory all but sealed
Oh really? How the 'lowest form of wit' makes people brighter and more creative

The uses of sarcasm

'Lowest form of wit' actually makes people brighter and more creative
A magazine editor with no vanity, and lots of flair

No vanity, but lots of flair

A tribute to the magazine editor Ingrid Sischy
Foraging: How the British rediscovered their taste for chasing after wild food

In praise of foraging

How the British rediscovered their taste for wild food