Most analysis—I believe correctly—targeted the September meeting as the start of the taper. But in between there were two extremely poor unemployment reports. Just after we had a government shutdown and a threat of default on our debt.
In the end we didn’t see a massive sell-off. Stocks didn’t tank and Treasury yields didn’t soar, ... What the market viewed as near-armageddon just this past summer was welcomed with open arms and hands turned inward (metaphorically) indicated buying activity.
Fed Chairman Ben Bernanke reiterated that tapering is not on a preset course and the pace of reductions could be increased or decreased depending on incoming data, during his last post-FOMC press conference.
Bernanke is trying to reaffirm us that interest rate hikes are far, far away on the horizon. No tightening is to be seen anywhere soon. But the “tapering” could happen even with a very expansionary monetary policy.
Wednesday's FOMC meeting is Ben Bernanke’s swan song, and if tapering is to be announced he would probably go out with falling bond markets, falling equities and a soaring dollar, not to mention disruption of emerging market currencies.