Rise in US economic growth brings tapering back into focus

Annual growth of 2.8% in third quarter GDP raises the prospect that the Federal Reserve could start to phase out quantitative easing programme sooner than expected
October’s Federal Reserve decision announced on the New York Stock Exchange. The US economic growth data suggests that tapering might be brought forward.
America’s economy grew at a faster-than-expected 2.8% annual rate in the third quarter of 2013, raising the prospect that the Federal Reserve could start to phase out its recession-busting quantitative easing programme before Ben Bernanke bows out in January.Wall Street analysts had expected the world’s largest economy to slow between July and September from the 2.5% pace recorded in the second quarter.
But in a keenly awaited statement – delayed by the government shutdown in October – the Department of Commerce said the pace of the US recovery had picked up.The health of the economy has been closely scrutinised by investors eager to gauge how soon the Fed will decide to “taper” the $85bn (£52bn) a month bond-buying programme it has been using to try to kickstart growth.Bernanke, the Fed chairman, sparked a bout of chaos in world markets that became known as the “taper tantrum” earlier this year, after he suggested starting to withdraw the Fed’s unprecedented programme of economic stimulus over the coming months.Experts have warned that this early estimate of GDP may be more tentative than usual, because the government shutdown may have hampered efforts to collect data. The BEA said that the acceleration in growth was broadly based, with consumer spending, stockbuilding by firms, state and local government spending, and property investment, all making a positive contribution.
Thursday’s data, which cover the third quarter of the year, do not yet reflect any damage inflicted on the US economy by the 16 day government shutdown that saw hundreds of thousands of public sector workers down tools in October as politicians on Capitol Hill wrangled over budget cuts.Another crucial indicator of the state of the US economy will come on Friday, with the delayed monthly jobs report. Bernanke has made unemployment the key indicator of when the Fed will choose to act, promising to leave interest rates on hold at least until the unemployment rate falls to 6.5% — provided inflation remains under control. The Fed’s Open Market Committee will hold two more meetings before Bernanke bows out at the end of January, when he is expected to be replaced by Janet Yellen, if she can win over sceptical Senators at forthcoming confirmation hearings.

Question In view of the article given above explain why the stock market seems preoccupied with the prospect of a Federal Reserve taper. What are the speculators afraid of? What does it mean for the future prospects of economic growth?