Federal Reserve minutes reveal QE tapering ‘in coming months’

Policymakers at the Federal Reserve stated in a meeting last month that it will begin to taper its $85 billion per month quantitative easing initiative “in the coming months.” The officials discussed whether or not to pull back its bond-buying program before seeing improvements in the labor market.

The minutes, which were released Wednesday afternoon of the Oct. 29-30 meeting, suggest that the central bank might “slow the pace of purchases at one of its next few meetings.” The Fed’s decision to persist in QE was widely expected among economists.

Fed officials talked about several possible scenarios that could transpire as they start to taper. One of the scenarios could lead to the possibility of high inflation and the formation of bubbles in stocks and junk bonds.

The language used in this meeting was rather similar to previous comments made in the spring and summer when it was reported the Fed would begin tapering. Of course, nothing was lowered and now there’s a possibility of it being increased.

The Fed has quadrupled its balance sheet to nearly $4 trillion.

Speaking to an audience at National Associations of Business Economists on Tuesday, exiting Fed Chair Ben Bernanke explained that asset purchases are not on a pre-determined schedule and depend on the economic outlook. He added that near-zero interest rates could persist even if the United States meets its goal of achieving a 6.5 percent unemployment rate.

“I agree with the sentiment, expressed by my colleague Janet Yellen at her testimony last week that the surest path to a more normal approach to monetary policy is to do all we can today to promote a more robust recovery,” Bernanke said in his remarks.

Incoming Fed Chair Janet Yellen has hinted at increasing QE. Many financial experts are already expecting Yellen to boost QE, including Peter Schiff and Marc Faber – Faber believes it could be increased to $1 trillion per month – due to the fact that the market needs its an additional fix of heroin.

(Schiff’s comments here and Faber’s remarks here.)

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