In a bow to acronym manufacturing, I placed the idea of TAPER ON, TAPER OFF (TOTO). We got a taper but it was offset by the Fed’s forward guidance on the unemployment threshold.In the FOMC statement the FED clearly said, “The Committee now anticipates, based on the assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well PAST THE TIME that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal.” The emphasis on the phrase PAST THE TIME is to highlight that the Fed will keep moving the threshold on what will constitute an acceptable level of employment, if not in words but in deeds.
Posts Tagged ‘taper’
Notes From Underground: FED, Dealing Three Card Monte on the Potomac
December 19, 2013Notes From Underground: Let’s Assume We Have a Can Opener (Part II)
December 15, 2013This is a very well-known punch line to a joke often told in academic circles in the 1970s: Three professors are stuck in a precarious situation in a post-nuclear catastrophe and need to open the cans of food that are provided in a case of disaster. In their desire to open the cans the three academics realize there is no tool to open the cans. The first professor, a physicist, suggests hooking up some type of pulley to enable the lid to be pried off. The second professor, a chemist, opines on using an acid to burn the lid off (each suggestion is dismissed fearing contamination from the food falling to the ground or being chemically soiled). The third professor is an economist and suggests, “let’s assume we have a can opener.” The gist of the joke is that economists make many assumptions on their way to searching for provable outcomes.
Notes From Underground: Does The Unemployment Data Allow The Fed to Taper?? (Yra Says 90% Possibility in December)
December 8, 2013Friday’s U.S. jobs report was stronger than pre-ADP consensus, only because of several pundits pushing the idea of 250,000 non farm payrolls (the whisper number seemed to be around 225,000). Thus, the 203,000 NFP was well within the range of prediction. The falling rate to 7.0% was a stronger sign of growth, especially when coupled with a rise in the participation rate and a fall in the U-6 rate. Average hours worked gained and wages increased by 0.2% per hour. All in all, it was the most positive data in many months. Manufacturing was a pleasant surprise as 27,000 jobs were added along with 17,000 jobs in the construction sector.
Notes From Underground: The FED Is on the Horns Of a Bullish Dilemma
September 17, 2013If the FED deems the market to be healthier than conventional wisdom it will TAPER to the high-end of market expectations–$20 billion and probably in Treasuries, not MBS as of now. A supposition must be made: If the FED were to do nothing, would the stock market first rally and then break as investors fear that the FED is afraid of a weaker economy in the months ahead? The FED therefore has to TAPER so as not upset the positive spin that has helped the stock market and other assets rally. Because the FED HAS TO TAPER the emphasis will be on academia’s newest catch phrase: FORWARD GUIDANCE. This phrase has been all the rage in the ECB, Bank of England and the BOJ press conferences. Its main thrust is that the central bank can DIRECT market behavior by talking the global economy into a glide path of growth by promising the continued supply of easy money and low interest rates.
Notes From Underground: Bernanke Channels Eric Burdon, “I’m Just a Soul Whose Intentions Are Good, Please Don’t Let Me Be Misunderstood”
June 26, 2013As the markets attempt to recover from the Bernanke press conference and the threats of Chinese forcing an economic slowdown, the spinmeisters are out trying to “TAPER” Chairman Bernanke’s words. It seems that Jon Hilsenrath and others are saying that the markets have misinterpreted the chairman’s words. So, the pundits and talking heads are correct and the markets are wrong. It seems that many bloviators insist Bernanke was not saying when, just throwing it out there and testing the waters. Not one talking head has raised the idea that Chairman Bernanke was unnerved by the work of fellow academic and Fed Governor Jeremy Stein and remove some of the overheating in the credit markets. After all, the SPOOS have held reasonably well in the face of global political upheavals, rising interest rates and the looming fears of deflation.