Will the tapering begin soon?

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As you will remember, we have had a number of posts on Jennifer Listens… regarding the Federal Reserve and its bond-buying program. (Specifics can be found here, here and here.)

Well, this week the Fed Chairman, Ben Bernanke, addressed the National Economics Club and stated that the Fed is still considering tapering the bond-buying program. He noted that the economy is strengthening, but did say that even with a taper, a large portion of the Fed’s program will still be in place in the coming years. He did not give a specific timeline as to when the tapering may begin, though various economists over the past months have speculated anywhere from December to March of 2014.

Bernanke discussed what would need to occur for the Federal Open Market Committee (FOMC) to decide to begin the tapering. He said the FOMC:

“still expects that labor market conditions will continue to improve and that inflation will move toward the 2 percent objective over the medium term. If these views are supported by incoming information, the FOMC will likely begin to moderate the pace of purchases.”

Concerns about the sluggish labor market were cited back in October at the last FOMC meeting. And you’ll remember that we discussed why the housing market recovery has not helped the job market , specifically in the area of construction. Hopefully with the strengthening economy, labor market conditions will improve.

As for the tapering, it seems to still be on the table, but the timeframe is unclear. Some think nothing will happen until after January 31, 2014 when Janet Yellen (The number 2 at the Fed) will most likely take over Bernanke’s position as Chairman. She was just approved today by the Senate Banking Committee and next comes the final vote by the full Senate. It should be an interesting beginning to the new year.

[Source: RealtorMag.com]

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