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Is there a room for more tapering?

The Federal Reserve gets a lot of credit for what passes as an economic recovery. Whether it deserves that credit, going forward the Fed has very little power to influence events because it is essentially out of ammo to further ease. The economy, meanwhile, is still lackluster, despite the central bank’s unjustified optimism.

The Fed cast a warm and fuzzy glow in January, when it predicted a pickup in economic growth, which it cited as its rationale for tapering its bond buying campaign, called quantitative easing (QE). And if that acceleration doesn’t happen in the near future?

Don’t worry: Wall Street will just shift its predictions for a growth resurgence to the second half of the year, as it’s done every year since about 2005 — if memory serves correctly. At this time of year, the Street always says that things will get better in the second half.

The revision of fourth-quarter 2013 gross domestic product growth of 2.8% is not enough of a reason to reverse the Fed’s QE policy, which seems to have less and less effect on the real economy, according to the central bank’s own research. The Fed says it will gradually taper its monthly bond buying, most likely ending it altogether late in the year. But the Fed’s new chief,Janet Yellen, adds that it reserves the right to change course and increase the purchases if the economy dips.

If the current first quarter does end up with say, 1.5% GDP growth, the bad weather in much of the nation will be a factor. But the weather effect is still amorphous enough not to reverse course. Once winter fades, there will inevitably be a rebound effect, so the bank may have to wait until the third quarter before it feels comfortable saying anything about the true core rate of growth (although it probably will cut its 2014 forecast by the June meeting).

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6 Responses to “Is there a room for more tapering?”

  1. Marvin says:

    Room for more tapering?? Ha! I’d say there’s a lot more and there shouldn’t have been any stimulus in the first place =) Only time will tell how this mess will play out.

    • Martin says:

      totally agree, but those idiots think it is good for economy, so they make more debt to solve the debt… we will hit the ground with our mugs hard some day

  2. I want to link to a YouTube Video with Jim Cramer from 2007:
    http://www.youtube.com/watch?v=rOVXh4xM-Ww

    Jim freaks out completely at 2.00 – because of Ben Bernanke ;-)

    So cool :-)

    Best regards

    Michael

  3. Fast Weekly says:

    Haha, they are such a joke. Always changing their predictions to match the data. Have you ever noticed that we never have recessions when the Fed predicts them? They always come when the Fed forecasts clear sailing :o/

    -Bryan

    • Martin says:

      LOL, you are right. Yellen was clear and saw no crisis coming in 2008 when they asked her. Same with Bernanke. I am laughing when reading their predictions and concerns and policy direction. I do not listen to them, because I cannot stand such condensed idiocy in one place, but read it only and yet get stunned.



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