The most highly anticipated meeting of the Federal Reserve has begun, with the US central bank expected to finally decide to begin curbing its bond buying programme.
The central bank has kept overnight interest rates at near-zero for almost five years and it's been trying to stimulate the US economy by buying assets to try and hold down long-term interest rates.
In May the bank signalled the US economy was improving and that it would start to scale back the $US85 billion monthly asset purchases.
Chairman Ben Bernanke said in June that tapering could begin later this year if the economy continued to improve.
A director and head of fixed income at Harbour Asset Management, Christian Hawkesby, says it's likely the Fed will still continue with the stimulus, but to a lesser degree.
"That's our expectation - that they scale back the current programme from $US85 billion a month to potentially $US75 billion or $70 billion a month," he says.
This had already been priced into a lift in longterm interest rates, from as low as 1.6% in May to as high as 3%.
At issue is whether unemployment has fallen enough, GDP growth is strong enough and inflation is under control.
Director of Colombia University's Earth Institute Professor Jeffrey Sachs says the Fed is eager to start pulling back but it has to be careful, slow and moderate.
He says the signs in the world economy are promising and the Fed will take a cautious and gradual approach.
