Expect More Tapering

The markets are back open. I hope you enjoyed the long weekend. After the close, CA Technologies ($CA) and IBM ($IBM) are due to report.

At the WSJ, Jon Hilsenrath says that the Fed will continue to taper at its meeting next week.

The Federal Reserve is on track to trim its bond-buying program for the second time in six weeks as a lackluster December jobs report failed to diminish the central bank’s expectations for solid U.S. economic growth this year, according to interviews with officials and their public comments.

A reduction in the program to $65 billion a month from the current $75 billion could be announced at the end of the Jan. 28-29 meeting, which would be the last meeting for outgoing Chairman Ben Bernanke.

The Fed has been buying Treasurys and mortgage bonds in an effort to drive down long-term interest rates and spur spending, hiring and investment. Last year the Fed spent $85 billion a month buying bonds. Mr. Bernanke suggested at a December news conference that officials were inclined to continue cutting purchases in $10 billion increments at subsequent meetings as long as the economy keeps strengthening.

“We’re likely to continue on a path of gradual, measured reductions in the pace of purchases, assuming the economy tracks as we expect it to,” San Francisco Fed President John Williams said in an interview early in the month.

Bond buying is one of two prongs in the Fed’s strategy to boost the economy. The other is low interest rates, and Fed officials are once again debating how best to describe their plans for when they eventually begin raising short-term rates.

Posted by on January 21st, 2014 at 10:13 am


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