Fed Tapers $10 billion, lays out plan

The Fed has decided to taper by $10B and has provided a general outline for further asset purchase reductions stating; ‘If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings.’  And while this does not bring forward explicit values, this is enough information for economic agents to build-out their own schedules with some confidence.                                                                                

The Fed of course made the point of the purchase program still being data dependent on data:  “However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.”

There were no additional forward guidance measures taken and there were no changes to the interest paid on excess reserves.                                                                              

All of the above is absolutely consistent with my projections for this meeting.

 

                                                                               

About the Author

Martin McGuire, managing director at TJM Institutional Services

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