QE3 Tapering Continues

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blog-author-clayjeffreys3

The first Federal Reserve meeting of 2014 is the last time Ben Bernanke will be the chairman of the reserve. Should we expect any surprises from the  meeting?

Probably not. As unstable as the market has been over the last several months, the last thing anyone wants is a surprise as Bernanke exits stage left. One thing that is on everyone’s mind is the tapering of QE3.

oliver-twist-bernanke

Please sir, I want some more QE3?

As discussed on this blog, the Federal Reserve is bringing its current Quantitative Easing plan (called QE3) to an end, but there is still more of it to go around before it is gone for good.

The Federal Reserve wants to end QE3, but end it without causing a panic in the markets (unlike May/June 2013). The Tapering plan goes something like this:

  •  the Feds will slowly reduce the amount of bonds they purchase each month. January 2014 marked the first month of tapering.
  • the Feds will reduce the amount of bonds it buys every Fed meeting until they have completely exited the market.

Expect the tapering plan to continue with another $10 billion reduction in bond buying by the Federal Reserve.

What will be a consequence of the reduced bond buying? More on that tomorrow…

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