Goldman Sees Increased Risk of Tapering by December
There is an increased likelihood the U.S. Federal Reserve will begin scaling back its bond buying program in December, said investment bank Goldman Sachs following the latest Federal Open Market Committee (FOMC) meeting.
"The FOMC was more hawkish than we had expected," economists Jan Hatzius and Sven Jari Stehn wrote in a note published late Wednesday.
"Our takeaway is that the risk to our forecast of QE [quantitative easing] tapering starting in December has increased," they said.
(Read More:Global Markets Feel the Fed Tapering Sting)
What is particularly noteworthy, the bank said, is the Fed has become more specific on its timeline for ending quantitative easing.
Federal Reserve Chairman Bernanke at his press conference late Wednesday said the central bank could begin to cut back on bond purchases "later this year," if incoming data are consistent with the central bank's forecasts. He added that purchases could end in mid-2014, if the economy continues on a positive trajectory.
(Read More: Taper Tipoff? Bernanke Hints Easing End Is Nearing)
It is also significant that the Fed emphasized its optimistic assessment of the economic outlook, Hatzius and Stehn added, reflecting the central bank's hawkishness.
In FOMC's written statement, the committee wrote that it sees, "downside risks to the economic outlook for the economy and the labor market as having diminished since the fall."
Reflecting the optimism, the Fed reduced its unemployment forecast for the next three years by 0.15 percent to 7.25 percent by the end of 2013, 0.2 percent to 6.65 percent by end-2014 and 0.25 percent to 6 percent by end-2015.
(Read More: Bernanke Taper Tantrum!)
Goldman, however, believes this could be overly upbeat: "In our view this upgrade of the labor market outlook is surprisingly large given that the unemployment rate has only declined 0.1 percentage point since the last economic projections at the March meeting."
By CNBC's Ansuya Harjani