Well gang, we got the taper -- $10 billion to be exact.
Global and U.S. stock markets actually rose on the news. That means
good news was good news for a change. Markets correctly read
this decision, and the Fed correctly telegraphed its intentions, it
Building strength evident in the GDP growth rate and the strong
were two keys in the decision. The final key was last week's
two-year budget deal.
I expect last week's budget deal was put in place purposely before
this Fed meeting. This is a strategy we see, not a scramble.
And that is even more good news.
Do we actually have a U.S. plan here?
Having said that, the announcement made clear that the Taper is NOT
a pre-set course. What that means is if the labor markets head
south in the USA, the Fed's Open Market Committee will up the
bond-buying once again.
I think, overall, this FOMC statement implies that we hit $50
billion ($25 billion and $25 billion) by the end of February.
And the USA is most likely done with the flow rate of bond
buying as stimulus by Spring...or Summer at the latest.
Here is the key piece of the Dec. 18th FOMC statement -
"Taking into account the extent of federal fiscal retrenchment
since the inception of its current asset purchase program, the
Committee sees the improvement in economic activity and labor
market conditions over that period as consistent with growing
underlying strength in the broader economy.
In light of the cumulative progress toward maximum employment and
the improvement in the outlook for labor market conditions, the
Committee decided to modestly reduce the pace of its asset
Beginning in January, the Committee will add to its holdings of
agency mortgage-backed securities at a pace of $35 billion per
month rather than $40 billion per month, and will add to its
holdings of longer-term Treasury securities at a pace of $40
billion per month rather than $45 billion per month."
Eric Rosengren was the sole dissenter.
My RTI question: Do YOU like the Fed's $10 billion
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