To taper or not to taper ?
Sunday, November 24, 2013
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To taper or not to taper?
We find it hard to believe that the timing of a Fed tapering continues to be up in the air. Even St Louis Fed President Bullard, who seems to have a lot to say, appears to be confused. On Wednesday of the week just passed, he indicated that a Fed tapering was possible in December if the November Jobs were strong. Then on Thursday he seemed to indicate that a tapering is not imminent. I wish I had a dollar for every time I heard a Fed official over the years say that policy is not made by a single statistic, but here we stand in late November waiting for a single volatile number, which typically is subject to major revisions, as the determinant of a major Fed policy decision.
What We are expecting
We doubt the Fed will scale back on asset purchases before its March meeting for three reasons.
First early January could see another budget stand-off between the Republicans and Democrats. Then subsequently (March?) there will be another debt ceiling debate.
Secondly, Chairman Bernanke's term runs out on January 31.
Thirdly we feel that since the tapering process will take a period of time, it makes sense that Janet Yellen should be at the helm when the process is started and that she should have a press conference (next two are in December 2013 and March 2014) to explain how the process will work.
Note also that the Fed has been going to great pains to distinguish a taper and a monetary tightening. Up until now, the Fed has badly damaged its credibility by not being able to articulate clearly where its policy stands on this issue. They are learning that transparency is harder to implement than they had thought.
Week Ahead Calendar
The week ahead will see the Thursday Thanksgiving Holiday in the U.S. That means U.S. markets effectively will be closed from mid-day Wednesday through Friday (early close). U.S. data will be front-loaded in the period with a number of key housing and sentiment surveys. The latter portion of the week sees the usual monthend slew of Japanese reports.
Ayman Khlifat On Twitter
Follow @aymankkhlifat
To taper or not to taper?
We find it hard to believe that the timing of a Fed tapering continues to be up in the air. Even St Louis Fed President Bullard, who seems to have a lot to say, appears to be confused. On Wednesday of the week just passed, he indicated that a Fed tapering was possible in December if the November Jobs were strong. Then on Thursday he seemed to indicate that a tapering is not imminent. I wish I had a dollar for every time I heard a Fed official over the years say that policy is not made by a single statistic, but here we stand in late November waiting for a single volatile number, which typically is subject to major revisions, as the determinant of a major Fed policy decision.
What We are expecting
We doubt the Fed will scale back on asset purchases before its March meeting for three reasons.
First early January could see another budget stand-off between the Republicans and Democrats. Then subsequently (March?) there will be another debt ceiling debate.
Secondly, Chairman Bernanke's term runs out on January 31.
Thirdly we feel that since the tapering process will take a period of time, it makes sense that Janet Yellen should be at the helm when the process is started and that she should have a press conference (next two are in December 2013 and March 2014) to explain how the process will work.
Note also that the Fed has been going to great pains to distinguish a taper and a monetary tightening. Up until now, the Fed has badly damaged its credibility by not being able to articulate clearly where its policy stands on this issue. They are learning that transparency is harder to implement than they had thought.
Week Ahead Calendar
The week ahead will see the Thursday Thanksgiving Holiday in the U.S. That means U.S. markets effectively will be closed from mid-day Wednesday through Friday (early close). U.S. data will be front-loaded in the period with a number of key housing and sentiment surveys. The latter portion of the week sees the usual monthend slew of Japanese reports.
Ayman Khlifat On Twitter
Follow @aymankkhlifat
