Such a move would be a response to signs that the economy is strong enough not to need large monetary stimulus. Recent figures show that the unemployment rate fell 0.3 percentage points to 7 per cent last month; that real GDP grew at a faster-than-expected 3.6 per cent annualised rate in the third quarter; and that small business optimism is edging up. And with Congress having agreed a deal to avoid another shutdown of the government next month, one big risk to the economy has been avoided.
Priya Misra at Bank of America Merrill Lynch says the Fed has a "green signal to begin tapering". Jeremy Lawson at Standard Life says he would "not rule out a move" next week.
Although financial markets expect tapering to begin soon, most economists say that a move as soon as next week is not fully discounted by bond markets and as a result longer-dated bonds yields - which have been depressed by the Fed’s bond-buying programme - could rise a little. Few, however, are much worried by this. Rob Carnell at ING says the real economy can "cope just fine" with tapering.
One reason for this is that tapering is not a monetary tightening, but simply a lesser degree of loosening; the Fed will continue to buy bonds and print money for much of next year, but merely at a slower rate. And Steven Englander at CitiFX adds that the tapering could be very gentle at first - a reduction of as little as $5bn (£3.05bn) per month from $85bn of monthly bond purchases.
The danger, however, is that markets will extrapolate from a small tapering that even more tapering, and perhaps even a rise in interest rates, is likely later. But economists expect the Fed to stress that it does not intend to do this, perhaps by reiterating its promise not to raise rates at least until after unemployment has fallen below 6.5 per cent.
Such a promise means that a quick withdrawal of monetary stimulus would only be likely if the economy improves more rapidly than expected. But if this happens, shares would probably benefit more from higher earnings expectations and increased appetite for risk than they’d lose from less-loose monetary policy.
