Fed's Bullard Says Fed's QE Taper Announcement 'Inappropriately Timed'

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Go back to Fed's Bullard Says Fed's QE Taper Announcement 'Inappropriately Timed'

Stocks Fall, Rates Surge as Fed Outlines End of QE; Real Estate in Focus

June 20, 2013 11:00 AM EDT

Stocks are lower, while treasury yields continue to surge Thursday after Federal Reserve Chairman Ben Bernanke signaled that the end of QE is near. Bernanke indicated that the Fed's $85 billion monthly bond buying program is expected to taper off later in the year with the goal of ending bond purchases in mid-2014.

On top of yesterday's afternoon slide, the Dow is down another 238 points Thursday, the Nasdaq is down 49 and the S&P 500 is down 27.

The 10-year Treasury yield last traded at 2.40%, up nearly 10% since the Fed announcement. The 30-year Treasury last traded at 3.47%, up nearly 4% since the Fed announcement.

To illustrate the carnage in bond land, the 10-year is up 46% since the beginning of May. The 30-year is up 22% during that time.

Rising interest rates create various issues, but most notably for main street is in the real estate market. Rising mortgage rates threaten to put a damper on... More

Markets Crash as Bernanke Signals the Death of QE

June 19, 2013 4:50 PM EDT

Markets sold off hard Wednesday after Fed Chairman Ben Bernanke delivered news about upcoming tapering of QE. Specifically, Mr. Bernanke said the Fed may slow the pace of bond purchases later this year and end purchases in mid-2014.

"If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear," Bernanke said.

While market participants expected that tapering news from the Fed would come sooner rather than later, the comments from the architect of the program didn't sit well with punch-drunk markets.

The Dow fell 206 points, the Nasdaq fell 39 points and the S&P 500 fell 23. The 10-year treasury surged 5.9% to 2.31.

Below is a full transcript of Bernanke's opening remarks. They are perhaps the most important comments from the Fed Chairman in months.

"CHAIRMAN BERNANKE: Good afternoon. The Federal Open Market Committee (FOMC) concluded a two-day meeting earlier today. Based on its review of recent economic and financial developments, the Committee sees the economy continuing to grow at a moderate pace, notwithstanding the strong headwinds created by current federal fiscal policies.

The labor market has continued to improve, with gains in private payroll employment averaging about 200,000 jobs per month over the past six months. Job gains, along with the strengthening housing market, have in turn contributed to increases in consumer confidence and supported household spending. However, at 7.6 percent, the unemployment rate remains elevated, as do rates of underemployment and long-term unemployment. Overall, the Committee believes the downside risks to the outlook for the economy and the labor market have diminished since the fall, but we will continue to evaluate economic conditions and risks as they evolve.

Inflation has been running below the Committees longer-run objective of 2 percent for some time and has been a bit softer recently. The Committee believes that the recent softness partly reflects transitory factors; and, with longer-term inflation expectations remaining stable, the Committee expects inflation to move back toward its 2 percent longer-term objective over time. We will, however, be closely monitoring these developments as well.

In conjunction with this meeting, the 19 participants in our policy discussionsthe 7
Board members and 12 Reserve Bank presidentssubmitted individual economic projections.As always, each participants projections are conditioned on his or her own view of appropriate monetary policy. Generally, the projections of individual participants show they expect moderate growth, picking up over time, and gradual progress toward levels of unemployment and inflation consistent with the Federal Reserves statutory mandate to foster maximum employment and price stability. In brief, participants projections for economic growth have a central tendency of 2.3... More

FOMC Maintains $85B Bond Buying Plan

June 19, 2013 2:00 PM EDT

(Updated - June 19, 2013 2:01 PM EDT)

FOMC keeps $85 billion monthly bond buying plan; maintains target range for the federal funds rate at 0 to 1/4 percent; 6-1/2 percent unemployment target.

Full Statement:

Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside risks to the outlook for the economy... More