A majority of economists surveyed by Bloomberg on Dec. 6 estimated that the central bank would delay tapering until next year. Even so, 34% of the respondents projected the Fed would announce reductions in bond purchases today, the survey showed, double the percentage in a Nov. 8 poll.
Bernanke is scheduled to retire at the end of January. Vice Chairman Janet Yellen, who may win Senate confirmation this week to replace him, has been a supporter of the bond-buying policy. The FOMC next meets Jan 28-29.
“While the Fed explicitly states they’re trimming their asset purchases, they continue to re-affirm their expectations of a ‘highly accommodative’ stance on monetary policy and exceptionally low rates,” said Yousef Abbasi, market strategist at JonesTrading Institutional Services LLC, a Westlake, California-based broker. “No one seems unnerved even though the majority hadn’t forecasted a taper in December.”
The rally erased the monthly loss for the S&P 500, with the index up 0.3% in December. The final month of the year has been the second-best for U.S. equity returns, according to data compiled by Bloomberg that starts in 1928. The average gain for the month is 1.5%, more than twice the overall monthly mean of 0.6%.
The equity benchmark has surged 27% this year, on course for the biggest annual gain since 1998, as the Fed maintained its stimulus and economic data exceeded expectations. The gauge rallied 167% from a 12-year low in 2009 through yesterday.
The Chicago Board Options Exchange Volatility Index plunged 15% to 13.83, erasing an early gain of 3.3% and halting a six-day rally.