The financial markets have fluctuated over the past month because Federal Reserve Chairman Ben Bernanke hinted that he may begin to taper off the latest round of quantitative easing if the data suggested the economy was improving – he also said it could increase if the data permitted it.
Since then, there has been much speculation about both his retirement from the Fed and when QE would come to an end. Former Fed Chairman Alan Greenspan urged Bernanke to start tapering off QE, while other board members have called for an end to the bond-buying initiative.
Although the United States won’t know what the Fed will be doing until after the news conference is held, a new report by CNN highlighted the projections of economists and investment strategists and when they think QE will begin to diminish.
More than two-thirds of the 39 experts pegged concurred that QE will not shrink until at least December, while others even noted that it could continue at its rate until sometime next year because there is a sentiment that it is still too early to reduce the $85 billion Treasury and bond acquisitions. Meanwhile, no one had said they think the monetary policy would be revised at this week’s policy meeting.
“When we look at the data, we see a labor market that isn’t really accelerating and an inflation picture that is showing greater signs of deflationary pressures than inflationary pressure,” said Thomas Simons, money market economist for Jefferies & Co., in an interview with the news network. “We don’t see a fundamental justification for a change in policy.”
Bernanke has confirmed on several occasions that the present policy would not be changed until the unemployment rate hits 6.5 percent and the labor market significantly improves. However, as Economic Collapse News has reported, it would still depend on how the jobless rate got to that figure.
Peter Schiff, president of Euro Pacific Capital and bestselling author of “The Real Crash,” spoke with CNBC on Tuesday and said that he does see the Fed tapering back, but there will not be a full blown exit because the financial markets highly depend on the central bank’s stimulus and pumping of money into the system.
Schiff also noted that he believes the Fed will actually increase the size of its monthly QE because “that’s the only way to stop the bond market from imploding and they will do that until they can’t do it anymore.”
The Fed will publish the details of its policy decisions and forecasts at 2 p.m. and a press conference will be held at 2:30 p.m. Be sure to check tomorrow morning for a full recap of the day’s events.
This is one of the final meetings that Bernanke will be involved in as he is expected to retire from his post when his term expires in January. As ECN reported, it is expected Vice Chair Janet Yellen will be appointed by President Obama, who would not confirm or deny he would reappoint Bernanke if asked to.