US Federal Reserve keen to resume massive asset-buying program after government shutdown

By Rizza Sta. Ana

Oct 30, 2013 02:02 PM EDT

Reuters said in its report that the US Federal Reserve would maintain its aggressive position in acquiring bond securities. The bond purchases was expected to continue after the conclusion of the government agency's two-day meeting on Wednesday. It was also deduced that the Fed would provide soft data on US economy as reason to extend the bond-buying program to next year.

Rabobank economists wrote to clients in a note, "The October government shutdown has undoubtedly slowed down the economy in the fourth quarter. It will be 2014 before we are able to see a number of months of economic data that may convince the FOMC (Federal Open Market Committee) that the recovery is continuing at a solid pace."

The government shutdown ran for 16 days, but investor worry escalated into a potential debt default.

The US central bank undertook three bond buying rounds. The activity had increased its balance sheet size four times to over USD3.7 trillion and kept interest rates to near zero. The bond purchases reportedly held down costs of long-term borrowing.

Bank of the West chief economist Scott Anderson believed that the Fed would keep its USD85 billion monthly bond purchases pace until March next year.

"I think you will certainly see a change in tone in the statement," said Anderson.

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