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18 Sep 2013
Reasons why QE taper will happen in Sept
FXstreet.com (Barcelona) - At this time tomorrow, with the Fed monetary policy decision out of the way, new short term trends are likely to develop, subject to the amount of tapering the Fed makes under the quantitative easing program (QE3).
Consensus out in the street, as Milan Cutkovic from FXWW notes, is that "traders expect that the Federal Reserve will scale back purchases by $10 billion a month while keeping rates close to zero for some time", adding that "analysts think anything below that figure would disappoint markets and set the course for further losses in the US Dollar."
Why is Sept the most opportunistic month to commence taper?
There is a theory floating on this month, out of the 3 meetings left this year, being the best opportunistic time for the Fed to kick-start the long-awaited 'taper'.
According to Credit Suisse chief economist Neal Soss, cited by Business Insider: "The reason is the calendar. If FOMC don’t begin tapering this month, the next opportunities are their October 29-30 and December 17-18 FOMC meetings."
October, as Soss explains, "is likely to be right in the middle of the debt ceiling fight", and since controversy and dispute among policy-makers is almost a done deal, the timing to taper in October might not be precisely the best.
Soss adds: "Also, President Obama may announce a nominee for Bernanke’s successor in mid-to-late October. This would not be an ideal moment for the central bank to experiment with a potentially disruptive operational change."
Soss argues that being Bernanke's last official meeting, sure he wouldn't like, "a holiday present to the nation and world economies to be a potentially negative shock, so, they probably have a predisposition to start now" Soss said.
Other theories are that as the transition for a new Fed Chiarman follows its course, no one better than Bernanke to address questions regarding the taper as opposed to a fresh new Chairman.
Consensus out in the street, as Milan Cutkovic from FXWW notes, is that "traders expect that the Federal Reserve will scale back purchases by $10 billion a month while keeping rates close to zero for some time", adding that "analysts think anything below that figure would disappoint markets and set the course for further losses in the US Dollar."
Why is Sept the most opportunistic month to commence taper?
There is a theory floating on this month, out of the 3 meetings left this year, being the best opportunistic time for the Fed to kick-start the long-awaited 'taper'.
According to Credit Suisse chief economist Neal Soss, cited by Business Insider: "The reason is the calendar. If FOMC don’t begin tapering this month, the next opportunities are their October 29-30 and December 17-18 FOMC meetings."
October, as Soss explains, "is likely to be right in the middle of the debt ceiling fight", and since controversy and dispute among policy-makers is almost a done deal, the timing to taper in October might not be precisely the best.
Soss adds: "Also, President Obama may announce a nominee for Bernanke’s successor in mid-to-late October. This would not be an ideal moment for the central bank to experiment with a potentially disruptive operational change."
Soss argues that being Bernanke's last official meeting, sure he wouldn't like, "a holiday present to the nation and world economies to be a potentially negative shock, so, they probably have a predisposition to start now" Soss said.
Other theories are that as the transition for a new Fed Chiarman follows its course, no one better than Bernanke to address questions regarding the taper as opposed to a fresh new Chairman.