Monetary policy now a slave to fiscal uncertainty

Even if Congress manages to keep the Federal government open and raise the debt ceiling next year, the continuing fiscal uncertainty is only going to make the Fed's job that much harder. That fiscal uncertainty comes in addition to the uncertainty surrounding the impact that the two-week shutdown had on the economy, including the delay to the flow of economic data. On balance, we still expect that the Fed will begin to taper its asset purchases before the end of this year, but we wouldn't rule out a longer delay, possibly even until mid-2014.