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
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map