In line with the recovery realized in the largest economy of the world, the US, the Federal Reserve (Fed) is expected to trim down its ongoing Quantitative Easing-3 (QE-3) program to USD 65 billion a month from the existing voluminous asset purchase of USD 85 billion every month. Amidst the heating debates among the central bank’s policy makers concerning the tapering of the assets purchase program, the financial markets have been moving sideways. Further, it is also believed that the Fed would split its asset purchase program in two categories, buying of the mortgage bonds worth USD 30 billion and monthly treasuries equivalent to USD 35 billion, a cut of USD 10 billion in each of the categories.

Despite few weeks back the market analysts’ and economists were expecting a huge cut in the existing unprecedented QE-3 program, taking into account the realized weaker than expected growth in the US, especially in the manufacturing sector, the Fed might not lower or cut-back the ongoing easing program by a significant chunk. Initially, the market had been forecasting the cut to be equivalent to USD 35 billion, i.e., monetary easing of only USD 50 billion a month. But the economic stances have changed and so would be the action of Fed, opines economists.

The tapering of QE-3 could commence just from the mid of June and might also hit the floors by the mid of next year, i.e., 2014, everything relies on the market fundamentals and evolving economic indicators, argue the market analysts. Further, if the US economy realizes a job growth of around 1, 50,000 to 2,00,000 a month henceforth and if the economic growth rate reaches or crosses 2.5 percent, the Fed would have sufficient room to taper the ongoing QE-3 with high consideration.

 The market has started to go optimistic amidst the Fed’s signals on tapering the easing program. As the pull back reflects the improving health of the US economy, the overall market sentiment is believed to stringently improve once the Fed starts to amend its easing regime.