Why Markets Will Tumble When The QE Taper Starts

printing QEMoney Morning Staff: With the U.S. Federal Reserve expected to discuss plans to end QE at its Sept. 17-18 policy meeting, it’s time to consider what happens when the QE taper starts.

You know that members of the Fed have been hinting since June that the central bank wants to scale back on its $85 billion a month bond-buying program, the third round of what’s known officially as quantitative easing.

After months of mixed signals, no one’s quite sure whether the Federal Reserve Open Market Committee (FOMC) will actually start the taper process now or delay it another few months.

The dilemma the Fed faces was illustrated when August’s soft jobs number caused concern that the economy – and the stock market – isn’t quite ready for a QE taper.

“The Fed is under increasing pressure to taper without destroying the financial markets; this number wasn’t soft enough to remove the possibility of a ‘test-taper’ this fall,” Money Morning Chief Investment Strategist Keith Fitz-Gerald said. “Whether the taper is $10 or $10 billion doesn’t matter. The markets are going to have a ‘taper-tantrum.'”

Pages: 1 2

Leave a Reply

Your email address will not be published. Required fields are marked *