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19 Jun 2013
Bernanke: The Fed are ready to start tapering
FXstreet.com (Barcelona) - Following the Fed decision to hold rates and the optimistic FOMC economic projections, Fed Chairman Ben Bernanke indicated that the Fed are ready to start tapering QE.
Bernanke began by highlighting the optimistic growth forecasts for 2013 and 2014, making reference to the hotly anticipated exit strategy, commenting, on “setting fed funds target over medium term and continuing purchases of MBS”. Further, he added that an improvement in the unemployment rate to 6.5% should not be considered to be a trigger for an immediate rate hike. He added that he is personally expecting this to occur during 2015.
On the subject of tapering QE, Bernanke commented that the FOMC may look to moderate the pace of asset purchases with 2013, commenting, “(It) Would not be shrinking the balance sheet, just slowing the pace of growth." In response to previous indications by other FOMC members that the Fed could even accelerate purchases, Bernanke indicated that the probability is for purchases to decline. His overall messages is that if the US economic recovery continues, the Fed will look to taper within 2013 with a fall to 7% in unemployment now the target.
Additionally, he added that the FOMC believes that there will be considerable time difference between the tapering of QE funds and rate hikes, implying that the FOMC are clearly focused on an exit strategy, but stability is a priority over everything. Looking to inflation he commented that anticipates it heading towards the 2% objective over time.
Bernanke began by highlighting the optimistic growth forecasts for 2013 and 2014, making reference to the hotly anticipated exit strategy, commenting, on “setting fed funds target over medium term and continuing purchases of MBS”. Further, he added that an improvement in the unemployment rate to 6.5% should not be considered to be a trigger for an immediate rate hike. He added that he is personally expecting this to occur during 2015.
On the subject of tapering QE, Bernanke commented that the FOMC may look to moderate the pace of asset purchases with 2013, commenting, “(It) Would not be shrinking the balance sheet, just slowing the pace of growth." In response to previous indications by other FOMC members that the Fed could even accelerate purchases, Bernanke indicated that the probability is for purchases to decline. His overall messages is that if the US economic recovery continues, the Fed will look to taper within 2013 with a fall to 7% in unemployment now the target.
Additionally, he added that the FOMC believes that there will be considerable time difference between the tapering of QE funds and rate hikes, implying that the FOMC are clearly focused on an exit strategy, but stability is a priority over everything. Looking to inflation he commented that anticipates it heading towards the 2% objective over time.