Its curious in hindsight that the market was surprised that the Fed failed to reduced bond purchases back at the last meeting, when the private sector has been much more bearish on growth. Even following the recent downgrade to FOMC member expectations, growth at 2% for 2013 remains well above the 1.6% consensus number, with the FOMC also above in 2014.
If the private sector doesn't expect the Fed to hit their numbers anytime soon, then markets should be skeptical about the prospect of tapering in the near future.
It seems unlikely that growth will surprise to the upside given the federal government shutdown, although momentum is potentially better than expected before the political deadlock began. The latest ISM data were healthy at both the headline level and in the details.
It would have probably taken more than a good ISM reading to convince the Fed that the tapering delay was only going to last one meeting. And with other uncertainties emerging, it seems likely that they will sit on their hands for a bit to gauge the fallout from the current issues in Washington.
