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So the Fed Didn’t Taper… Now What?

As we all learned, the Federal Reserve did not taper its $85 billion in stimulus efforts after its Federal Open Market Committee meeting earlier this week. The inaction was quite the surprise, considering the consensus view seemed to be that tapering was about to begin. I differed from the consensus in that I expected a modest initial round of tapering following the disappointing August Employment Report and tepid Federal Reserve Beige Book report. That data showed our economy is still on shaky ground and is characterized by declining work force participation and wages that remain under pressure.

As Federal Reserve Chairman Ben Bernanke made clear this week, the Fed will continue its highly accommodative policies at least until the U.S. economy hits a 6.5% unemployment rate. In his prepared statement shared on Wednesday, Bernanke explained that committee participants in aggregate see “the projected unemployment rate for the fourth quarter of next year encompasses 6-1/2 percent, 12 of the 17 participants expect the first rate increase to take place in 2015 and two expect it to occur in 2016.” As you probably know, the stock market took the news of continued sugar stimulus very well — to the tune of a more-than-145-point move in the Dow Jones Industrial Average after the news broke. What you may not know is Bernanke’s comments also served to push the 10-year Treasury yield down sharply.

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archive

So the Fed Didn??t Taper… Now What?

As we all learned, the Federal Reserve did not taper its $85 billion in stimulus efforts after its Federal Open Market Committee meeting earlier this week. The inaction was quite the surprise, considering the consensus view seemed to be that tapering was about to begin. I differed from the consensus in that I expected a modest initial round of tapering following the disappointing August Employment Report and tepid Federal Reserve Beige Book report. That data showed our economy is still on shaky ground and is characterized by declining work force participation and wages that remain under pressure.

As Federal Reserve Chairman Ben Bernanke made clear this week, the Fed will continue its highly accommodative policies at least until the U.S. economy hits a 6.5% unemployment rate. In his prepared statement shared on Wednesday, Bernanke explained that committee participants in aggregate see ??the projected unemployment rate for the fourth quarter of next year encompasses 6-1/2 percent, 12 of the 17 participants expect the first rate increase to take place in 2015 and two expect it to occur in 2016.? As you probably know, the stock market took the news of continued sugar stimulus very well — to the tune of a more-than-145-point move in the Dow Jones Industrial Average after the news broke. What you may not know is Bernanke??s comments also served to push the 10-year Treasury yield down sharply.

To read the rest of this article, click here now.

Newsletter Signup.

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Written By

Chris Versace is a financial columnist and equity analyst with more than 18 years of experience in the investment industry. He has been ranked an All Star Analyst by Zacks Investment Research and his efforts in analyzing industries, companies and equity securities have been recognized by both Institutional Investor and Thomson Reuters?? StarMine Monitor. He??s frequently published in The Washington Times and is a frequent contributor to the daily radio show ??America??s Morning News? and ??America??s Radio News?. He has been quoted in the Wall Street Journal, Investor??s Business Daily, The Street, USA Today and other publications. In addition, he can be frequently seen on television??s ??Fox Business? show.

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