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Wednesday, June 19

19th Jun - Special: Fed Watch

One of the most anticipated FOMC meetings concludes today, and the big questions are if, when and how would the Federal Reserve start tapering its asset purchase programs.

First the critical feeds and material links, followed by articles and commentaries (from latest to newest). I will update the post during the next couple of days. Last update 22-June 09:00 GMT.

Video feed 1ustream
Video feed 2C-Span Live
Fed Statement Changes TrackerWSJ
FOMC data siteFED

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Live Blog: Bernanke Press ConferenceWSJ
Liveblogging the FOMC and Bernanke's press conferenceWonkblog / WP

Live markets commentary from FT.comalphaville / FT

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FOMC statement June 19 – FED
Economic Projections June 19 – FED (pdf)
   Accessible material – FED

FOMC statement May 1 – FED
Minutes of the Federal Open Market Committee, April 30-May 1 – FED

FOMC Statement May 20 – FED
FOMC Press Conference Mar 20 – FED
(includes video, transcript pdf)
Economic Projections Mar 20 – FED (pdf)
   Accessible material – FED

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Previously on MoreLiver’s:

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The Federal Reserve: Clearer, but less cuddlyThe Economist

America’s monetary policy: Tinker, taperThe Economist

Fed Seen by Economists Trimming QE in September, 2014 EndBB
The Fed will trim its monthly bond purchases to $65 billion in September and end buying in June 2014, according to the plurality of estimates by economists in a Bloomberg survey.

Unwinding quantitative
Stephen Grenville: Chairman Bernanke’s hints about the end of quantitative easing (QE) have produced volatility in financial markets. This column argues that financial markets were startled because an end to QE is likely to cause capital losses for bond holders since term premium is substantially negative. Bank regulators should be alert to the possibility. This fundamental explanation is teamed with widespread confusion among market participants about how quantitative easing actually works.

Is This The Chart That Scared Bernanke Straight?ZH
The fails-to-deliver has surged. This critical indicator of both collateral shortages and technical carry trade unwinds is a little-discussed indicator of just how broken the market is

7 charts that tell the Fed not to taper QE3MarketWatch
Commentary: There’s been no real, sustainable improvement in jobs

Fed's Bullard Explains His FOMC Dissent: Disagrees With Tapering In Light Of Deteriorating EconomyZH

James Bullard: This is why I dissented at the Fed meeting this weekWonkblog / WP
He sat down with us Friday morning at the Madison Hotel in Washington to discuss his dissent, his views on the state of the economy and why Wednesday’s Fed policy move represents a more hawkish FOMC.

In his own words: Fed’s Bullard explains dovish dissentMacroScope / Reuters

HilsenstoryTim Duy’s Fed Watch
Bullard was in the room and concluded the same thing markets concluded:  The Fed shifted in a hawkish direction this week.  Bernanke might have tried to cushion the blow, but you can't avoid the reality that he he laid out a plan to end QE - and that plan involves a shift toward a calendar component.   

It's About The CalendarTim Duy’s Fed Watch
I don't see how you can read Bullard's statement and not conclude that the primary consideration for scaling back asset purchases is the calendar.  I think that the date, not the data, is more important than Fed officials like to claim.

Bullard’s Unusual DissentWSJ
Bullard put his own statement on the St. Louis Fed’s website this morning. It was an unusual move, but “everything is unusual at the Fed these days,” Wessel said.

More Thoughts on QE3 Taper TimingCalculated Risk
The most likely meeting for announcing tapering this year is in December…probably the final press conference for Ben Bernanke as Fed chairman.

Reminder: For Fed to Taper, Economy Must Hit Rosy ForecastsWSJ
Bond investors have learned not to fight the Fed when it comes to its easing policy, but what about the economic forecasts that are today, more than ever, key to driving that policy?

Fed’s Bullard Explains DissentWSJ
Bullard, says he dissented at this week's Fed policy meeting largely because inflation is running well below the central bank's 2% target and said the committee should have waited before authorizing Bernanke to detail a plan to reducing the size of the Fed's bond purchases.

Economists Think Markets’ Taper Tantrum Is TemporaryWSJ
This most likely wasn't the reaction Federal Reserve officials wanted.

Grading Bernanke on CommunicationWSJ
David Wessel offered four tests for grading Bernanke’s success in clarifying the Fed’s intentions on the bond-buying situation. Stock and bond markets fell during and after his comments, but how did he do on clarity?

Investors Turn on FedWSJ
In other words, when the economy finally recovers for real, one result will be a fair amount of pain in the bond market. Rates can’t stay at the historic lows of recent years.

The Fed begins its long and gradual exitGavyn Davies / FT

What Bernanke's plan  means for world marketsTradingFloor
Teis Knuthsen: Contrary to expectations, the FOMC this week delivered an exit strategy for QE. If QE is unwound, how will this impact not just the US, but also more peripheral markets that have benefited from the liquidity creation?

Why are markets confused?TradingFloor
Steen Jakobsen: I am slightly perplexed as to why the market has such a hard time comprehending and adjusting to the subtle changes made by the US Federal Reserve over the past two FOMC meetings. To me, the Fed's actions appear rather straightforward and logical and this may be a good thing for markets and the next recovery phase.


The Fed begins its long and gradual exitGavyn Davies / FT
When we look back on the FOMC meeting on June 19 2013, it will probably be seen as the moment when the Fed signalled that it was beginning the long and gradual exit from its programme of unconventional monetary easing.

As good as it getsFree exchange / The Economist
I understand that the Fed is generally uncomfortable with unconventional monetary policy and has concerns about the side-effects from large-scale QE. That's eminently reasonable. The trouble is that the Fed seems not to have learned that aiming to overshoot on the pace of employment growth and inflation is the safer, more conservative route. Overshooting maximises the chance that monetary policy will maintain its potency the next time trouble hits.

Bernanke Has a Small Margin to Work WithWSJ
Banks traded some essential loan revenue for survival. It was a good deal until recently, when the new era of chronically low interest rates put banks in a zero-growth squeeze. Since 2008, interest rates charged to money-center banks have been essentially zero.

The Fed’s Spinal TapWSJ

Can You Hear Me Now?The Big Picture
Despite market reactions, it is unlikely that economic growth or the unemployment situation would justify a policy change in 2013, especially given the recent declines in the break-even inflation rates. Deflation, not inflation, is likely to be the short-term trump card concern that would dissuade the dovish FOMC from modifying even its asset purchase program this year. Markets won’t like this, and so we expect elevated volatility and risk premia combined with turbulence in debt markets

Bernanke and markets, crazed and confusedalphaville / FT
Before the presser on Wednesday, Ben Bernanke’s vague definition of “substantial improvement” in the outlook for labour markets resembled the old line about porn: he’ll know it when he sees it.

Bernanke Kills Fed Credibility and the Confidence Fairy in One Shotnaked capitalism

Fed’s Economic Projections – Myth Vs. Reality (Jun 2013)EconoMonitor

Four Charts to Track Timing for QE3 TaperingCalculated Risk
It is possible that the FOMC could start to taper QE3 purchases in December, but it would take a  pickup in the economy. (September tapering is less likely, but not impossible - but the pickup would have to be significant).

Taper On, Risk OffZH
Surveying The Global DamageZH
With the US equity markets only 2 to 3% off their highs, we thought it appropriate to look around the world at where the leveraged equity unwinds so far.


FOMC afterthoughts: Tapering is comingTradingFloor
Juhani Huopainen: The Federal Reserve is now committed to tapering the asset purchases and ending the programme by mid-2014 - but only if everything goes as planned.

Bill Gross: "Bernanke Might Be Driving In A Fog"ZH
The error of their policy-making ways is "to think that is a cyclical as opposed to a structural problem in terms of our economy."

A Potentially Tragic TaperKrugman / NYT

Analysis on Tapering QE3Calculated Risk

I don't think the Fed will have enough positive economic data to "moderate the monthly pace of purchases" by September. Right now it seems likely they will start tapering in December or in early 2014.

7% Unemployment: The Fed’s Newest ThresholdWSJ
Fed Chairman Bernanke cleared up one thing Wednesday: what exactly constitutes “a substantial improvement” in the job market. 

Bernanke Sees Beginning of End for Fed’s Record EasingBB
Bernanke is putting investors on notice that the central bank is prepared to begin phasing out one of the most aggressive easing programs in its century-long history later this year.

FOMC meeting - conclusion and aftermathTradingFloor
Nick Beecroft: The FOMC statement and Bernanke’s comments at the FOMC press conference last night were almost exactly as we had expected, both in content and tone.

Markets Contemplate Cold Turkey as Fed Outlines Plans for WithdrawalWSJ
So the markets’ stimulus addicts are heading for phased rehab as long as the most important patient shows signs of improvement.

The long goodbyeFree exchange / The Economist
It looks as if we are headed for a period in which good news on the economy is bad news for the markets.

Bernanke’s Forward Guidance Is Transparent as MudClive Crook / BB
Federal Reserve Chairman Ben S. Bernanke seemed a little nervous at his June 19 news conference.

Ignore the 'Taper,' Focus on Fed Rate HikesMatthew C. Klein / BB

Markets Got Bernanke's MessageMark Whitehouse / BB

Four Reasons Inflation Is Too LowEvan Soltas / BB

19-JUNE (AFTER, 21:40 GMT)

Lone Dissenter No More: Fed Officials Have Divergent ObjectionsWSJ
Kansas City Fed President Esther George again opposed the FOMC decision to press forward with its bond buying stimulus…Meanwhile, St. Louis Fed boss James Bullard took an unexpected path and dissented in what was effectively the opposite direction.

Bernanke’s Taper Timetable Spooks InvestorsWSJ
Bernanke signaled the central bank could start pulling back its $85 billion-per-month bond-buying program later this year. It could be wound down by the middle of 2014 if the unemployment rate hits a projected 7%.

Flash Comment: FOMC: QE tapering this year but at moderate paceDanske Bank (pdf)

FOMC Statement: Second ReactionTim Duy’s Fed Watch
Yes, as always, everything is data dependent.  But the Fed believes the current path of data is sufficient to justify scaling back and ending the asset purchases program.  Tightening policy via rate hikes, however, is still far in the future.

SocGen Taper Tantrum Post-MortemZH
"FOMC On Track For September Tapering"

19-JUNE (AFTER, 20:00 GMT)

Bernanke’s Car Analogy and the Rough RoadWSJ
The Fed won’t be pressing down on the brakes any time soon. It may, however, take its foot off the gas…The market didn’t exactly love the attempt.

This graph shows how bad the Fed is at predicting the futureWonkblog / WP
Higher projections are no reason to celebrate, given the spotty track record.

Fed expects to slow QE later this yearNordea
The Federal Reserve signalled today that it is on track to begin scaling back its monthly USD 85bn bond purchases later this year if the economy doesn’t disappoint.

19-JUNE (AFTER, 19:30 GMT)

No Tapering Now, But Worries IntensifyWSJ
Stocks dropped immediately after the release of the FOMC statement as a brighter economic outlook stoked concerns that the central bank could start “tapering” sooner than later.

Bernanke Speaks, The Stock Market Squeaks, The 5 Year ShrieksZH

Steen Jakobsen: Similar to our expectations but not the marketsTradingFloor

Bernanke Says Fed on Course to End Asset Purchases in 2014BB

Fed Decision: Breaking Down the FOMC ForecastsBB

Fed Sees Unemployment as Low as 6.5% by End-2014BB

U.S. Stocks Fall as Bernanke Says Fed May Pare StimulusBB

Fed keeps buying bonds, sees economic risks easingReuters
The Federal Reserve said risks to the outlook for the U.S. economy and job market had eased since last fall, but it said it would keep buying $85 billion in bonds per month given the still-high level of unemployment.

Dollar Soars, Assets Hit on Fed's AssessmentMarc to Market
The Fed statement noted that the downside risks have diminished since the fall when it more than doubled the size of the its asset purchases. This coupled with Bernanke's comment that tapering is possible later this year with QE ending purchases around the middle of next year.

19-JUNE (AFTER, 18:40 GMT)

FOMC Statement: First ReactionTim Duy’s Fed Watch

Redacted Version of the June 2013 FOMC StatementThe Aleph blog

Digging Through The Fed's Improving ForecastZH

Fed Expects Faster Growth, Lower Unemployment Next YearWSJ
The Federal Reserve projects that the unemployment rate could fall to 6.5% in 2014, a threshold it has conditionally set to begin raising interest rates.

Parsing the Fed: How the Statement ChangedWSJ

FOMC Projections and Press Conference Calculated Risk

19-JUNE (BEFORE, 16:45 GMT)

Fed Press Conferences, by the NumbersWSJ
Bernanke will step up to the microphones Wednesday for his tenth press conference. The press conferences, since they debuted in April 2011, can have a substantial influence on markets.

Fed Should Undo Twist Before TaperWSJ

Return of Drunk BernankeWonkblog / WP
What the Fed chairman might want to say, but probably won't

"Fed In A Box" - Vince Reinhart's FOMC Probability MatrixZH

19-JUNE (BEFORE, 14:30 GMT)

What to Expect From Fed TodayWSJ
The Fed’s policy committee wraps up its latest conclave today and Bernanke's challenge in clear: Lay the groundwork for pulling QE3 back without alarming the markets.

Why low inflation may not prevent the Fed from reducing QEMacroScope / Reuters
The low level of headline inflation largely reflects the drop back in commodity prices over the past 12 months, with even the low core rate partly explained by the indirect impact of those lower commodity prices. Under those circumstances, we wouldn’t expect the Fed to put too much weight on inflation being below its target.

FOMC Scenarios And What's Priced InZH
BofAML: 1) good news taper: markets should be able to transition from Fed-led liquidity support to a better growth-led recovery story, 2) the bad news taper: tapering seen as premature is likely to spur risk-off behavior, 3) not-so-timely technical taper: Fed is discussing tapering because it actually has a lower threshold than indicated, perhaps for some technical reason.

19-JUNE (BEFORE, 13:00 GMT)
FOMC Decision PreviewPragCap

Danske DailyDanske Bank (pdf)
FOMC meeting likely to once again stress that QE tapering is not a tightening of monetary policy but rather a reduction in monetary easing and that QE tapering will not imply that the Fed has moved the timing of its first rate hike closer

3 Numbers to Watch: UK BOE minutes, US Fed statement & forecastTradingFloor
The Bank of England releases minutes from the latest monetary policy committee meeting, followed in the US with the Fed's FOMC statement and new economic projections.

Market Preview: FOMC meeting in spotlight TradingFloor
European markets are likely to open lower on Wednesday. The much awaited FOMC meeting takes centre stage today and traders will be looking for hints on the potential timing of the scaling back of QE3.

Fedin kiristykset: Vasta syssymmällä * Norjan keskuspankki voi yllättää * Markkinat hermostuneita Fedin kokouksen alla

It’s FOMC day as we all try to read the taperTradingFloor
Today sees one of the most critical and highly anticipated FOMC days in a long time as we are in the midst of the pivot from an ever accommodative Fed to anticipating a more restrictive one. The only high probability outcome is high volatility.

Marking Time Ahead of the FedMarc to Market
There are three parts to the Fed story today: the FOMC statement, the forecasts and Bernanke's press conference. The statement itself is likely to be the least important…The Fed's forecasts are important…In his prepared remarks, we expect the Chairman to help investors differentiate between tapering and tightening and to try to drive home the point that current conditions are not sufficient to slow down the long-term asset purchases ($85 bln a month).

Morning MoneyBeat: Fed Meeting Has That Déjà Vu Feel to ItWSJ
This week’s rally ahead of the Fed announcement has a familiar feel to it…But if history is an indication, investors shouldn’t get too comfortable just yet.

Bernanke's done, Obama kinda sorta saysWonkblog / WP
The countdown may have officially begun for Federal Reserve Chairman Ben S. Bernanke.

The Tapering Talk and Rising Yields Are a Sign of RecoveryEconoMonitor
For (Bernanke) to even consider tapering implies he believes a solid recovery may be finally taking hold. But, by his own admission, a solid recovery means higher interest rates.

Bernanke: mission accomplishedFree exchange / The Economist
When Mr Bernanke speaks to the press tomorrow after the release of the Fed's latest policy statement and economic projections, his task will be to explain why those other factors justify the probable reduction in asset-purchases by late this year, despite the fact that the Fed remains well short of the programme's stated goals.

The chairman’s challenge MacroScope / Reuters
Bernanke says ‘taper,’ markets hear ‘tighten’

FOMC preview: QE tapering? Not yetTradingFloor
Mads Koefoed: We expect the FOMC to recognise some improvement in the data, but clarify that it is not enough to begin tapering QE just yet.

FOMC Decision - "Real Fundamentals" Or "Reaction Function"ZH
As asset-gatherers bluster about the fact that the Fed can't leave now because things are not that great (correctly) they are perhaps missing the key point that the Fed has changed its reaction function from fundamentals to technicals - and is worried...

Housing, Inflation and Fed, Oh My!WSJ
For most investors, the two-day Fed policy meeting is this week's main event. Policymakers have said future decisions will be data-driven, and this week brings new readings on factory activity, housing and inflation.

FOMC Projections Preview: Disinflation WatchCalculated Risk
I expect no change to policy at this meeting, but a slight downgrade to the economic projections - and some concern about inflation (but probably not enough to increase the size of QE3 purchases).

FX Comment: taper…or holiday?Nordea
Bernanke almost has no choice here but to act dove on June 19th FOMC meeting – or else, none of us can peacefully go on summer holiday… You know the worry is on high level when you hear IMF prompting to keep up the QE in large for now while continuing preparation to exit “smoothly”.

Will Fed Bring a Breather From Yen’s Roller-Coaster Ride?WSJ
f the FOMC meet adds momentum to talk of a quantitative easing exit or fails to clarify its position, that will likely push the dollar even further down against the yen, putting traders on another lap of their roller-coaster ride.

Chart that seems to violate key principles of money creationSober Look
A clear divergence in trends of the total loans and leases on US banks' balance sheets and the broad money supply measure (M2). Loan balance growth is slowing, while the money supply keeps growing at a steady rate of around 7%.

6 Weeks Of Hawkishness And 4 Dovish Expectations For This Week's FOMCZH
Goldman Sachs: While we do not expect the committee to deviate much from the existing message and keep all options open, we anticipate that Fed officials will, on the margin, try to calm markets at the June 18-19 FOMC meeting.

Prisoner's Dilemma: Will Investors And The Fed Collaborate?ZH
Citi's credit team: 'widening' in credit spreads but is just as useful in considering the weakness in equity markets since the capital structure arbitrage-led relationship between equity and credit as liabilities on the balance sheet of a 'firm' means that any disconnect cannot last long.

FOMC preview Danske Bank (pdf)
Once again Bernanke faces a communication challenge

Fed heading for exit: stand clear of the closing doorsNordea (pdf)
Or the summary here.

Watch What Fed Says, Not What It DoesWSJ
At this week's Fed monetary policy meeting, it comes down more to what officials will say, than what they'll do.

The Fed’s Tapering Trial BalloonWSJ
“It may be that policymakers wanted to ‘test the waters,’ determine the pervasiveness and ultimately force the shake out of some carry trades,” BCA Research wrote in a report.

Why the Fed’s ‘Tapering’ Matters So MuchWSJ
Ahead of the Fed’s two-day meeting, beginning tomorrow, here’s a look at what has happened in the markets since Bernanke said on May 22 that the Fed could start pulling back its bond buying sometime within the next few meetings.

FOMC Meeting Begins TomorrowTim Duy’s Fed Watch
This FOMC meeting is about the Fed regaining - or further losing - control over its communication strategy.  Bernanke will attempt to detail how exactly the data flow is supportive of scaling back asset purchases in the next few months (I believe the Fed prefers September) while at the same time disassociating asset purchases from interest rate policy.

Taper talk persists despite missed jobs, inflation targetsMacroScope / Reuters
So, either policymakers see brighter skies ahead or they want to get out of QE3 for other reasons they may rather not air too publicly: worries about efficacy or possible financial market bubbles.

FT Joins The Fray: "Fed Likely To Signal Tapering Move"ZH
Ben Bernanke is likely to signal that the US Federal Reserve is close to tapering down its $85bn-a-month in asset purchases when he holds a press conference on Wednesday, but balance that by saying subsequent moves depend on what happens to the economy.

What The Fed Is Looking AtZH
From an economics perspective it was just a matter of time before conditions began to break down; gains in equity indexes to record highs amid sluggish economic performance were simply unsustainable.

JPMorgan: "Fed Stimulus Inflated Prices....Removal Could Create Tail Event"ZH
Then: Risk-On/Risk-Off: Ironically, positive data caused equities and bonds to trade lower on increased probability of tapering (good data were bad for stocks)….Now: the "Fed Regime": ecent bouts of positive correlation of equities, bonds and commodities, suggest that the Fed’s stimulus inflated prices of a broad range of financial assets, and removal of the stimulus could create a tail event in which prices of all assets could go down.

What the Fed tapering debate and Justin Bieber obsession has in commonWonkblog / WP
If the economy evolves as expected, has the Fed become any more or less inclined to maintain its easy money policies than it was a few months ago? I am reasonably confident that the answer to that is no, and that the volatility we’ve seen in markets around the tapering debate is not grounded in something real.

The IMF lowered its 2014 growth outlook and suggested that the Fed should continue its $85 billion a month bond buying until at least the end of 2013 and repeal government spending cuts.

Concluding Statement – IMF
Video: Press Conference on Consultation – IMF
Transcript of a Press Conference – IMF

IMF Sees Fed QE Through 2013, Warns of Exit Plan Challenges – BB
U.S. Stocks Fall on IMF Outlook, Warning on Stimulus Exit – BB
IMF urges repeal of 'ill-designed' U.S. cuts – Reuters

IMF Urges Repeal of 'Ill-Designed' Spending Cuts – Economist’s View
IMF Article IV on the US – Econbrowser
I.M.F. Urges Washington to Repeal ‘Ill-Designed’ Spending Cuts – NYT
IMF to Congress: No, seriously, guys, stop it – Wonkblog / WP
IMF Wades Into Fed Exit Debate, Urges No Change Through 2013 – WSJ
IMF: It Ain’t Over Till The Fat Lady Sings – ZH
Against Stupidity, The IMF Itself Contends In Vain – Krugman / NYT

The Biggest Economic Mystery of 2013: What's Up With Inflation?The Atlantic
Despite QE3, core inflation just hit a 50-year low

Asset purchases tapered in June?Handelsbanken (pdf)
We expect the FOMC to taper asset purchases either at the June or September meeting. In our view, the FOMC at its June meeting will either taper asset purchasing or explicitly signal (in its post-meeting statement, for example) that a reduction in the pace of asset purchases is coming soon.

Goldman FOMC Preview: "Calming the Market"Calculated Risk

The Fed Is Tightening, Whether or Not It Wants ToView / BB

Is the Fed Going to Dial Down Its QE Taper Talk? naked capitalism

The Fed and emerging markets: The end of the affairThe Economist

Five Stages of Fed Tapering WSJ

Weekly Preview BNY Mellon
Noted Fed watcher, Jon Hilsenrath is not alone in feeling that Ben Bernanke may look to reassure over the Fed’s measured approach to policy tightening.

Weekly Focus Danske Bank (pdf)
US: The Fed meeting gives Ben Bernanke an opportunity to guide market expectations. Markit PMI will provide new data on the extent of the soft patch. Euro area: main release next week is flash PMIs for June. We expect improvements in both service and manufacturing PMIs. China: There have recently been conflicting signals from PMIs, so the flash estimate for HSBC manufacturing PMI for June is key to watch.

Weighing the Week Ahead: Will the Fed Change Course?A Dash of Insight

Yield Forecast Update: Volatility is backDanske Bank (pdf)
Discussions about the Fed scaling down asset purchases later in the year have fuelled a sell-off in the core bond markets and led to a rise in volatility over the past month. European markets have not been shielded from the increase in rates, despite a weak economic outlook and despite the ECB keeping its options open for further easing.

Week Ahead: 15-21 June 2013 Nordea (pdf)
US: The FOMC meeting is coming up next week and recent article by Jon Hilsenrath suggests markets may have gone ahead of themselves in recent rates sell-off. Euro area: PMIs from Germany, France and the Euro zone is on the agenda, with ZEW as an appetizer.

The Fed is still keen to be investors’ best friendThe A-List / FT
Mohamed El-Erian: Markets rallied sharply late on Thursday on unconfirmed indications that the Fed may push back more forcefully on investors’ fear of a pre-mature tightening in monetary policy. To sustain the change in market sentiment for more than a few days, the Fed would need to follow up with greater details

Fed Likely to Push Back on Market Expectations of Rate IncreaseWSJ
An adjustment in the program won’t mean that it will end all at once, officials say, and even more importantly it won’t mean that the Fed is anywhere near raising short-term interest rates. Investors aren’t listening.

Is the Fed Going to Dial Down Its QE Taper Talk?naked capitalism
The Fed has a difficult task ahead - TradingFloor
Nick Beecroft: The Federal Reserve has embarked on an ambitious journey, during which they intend to simultaneously burst bubbles, avoid a bond market rout, and boost lending to consumers and businesses. This may prove to be an enormously difficult task.
US Bonds In "Panic" ModeZH
Based on Credit-Suisse's Panic-Euphoria model of risk appetite, US bond markets are on the verge of the short-term capitulative "Panic" mode. Each time we have reached this level of 'selling' in the last 6 years, Treasury yields have compressed significantly.

Two For TaperingTim Duy’s Fed Watch
Today's data appears consistent with Fed expectations that they can begin tapering asset purchases this year.  Still a horse race between September and December, although I think the Fed is aiming for the earlier date if data allows.

Yellen overwhelming favorite to replace Bernanke at Fed: Reuters pollReuters
Yellen likely to replace Bernanke at Fed MacroScope / Reuters

Fed Tapering: Asset Class SensitivityThe Big Picture

The futures market implies the Fed "taper" to end by early 2015Sober Look

Fed’s Bullard: Weak Inflation May Argue For More StimulusWSJ

Bullard Holds His GroundTim Duy’s Fed Watch
Bullard remains focused on inflation.  If his colleagues were to join him, they would stop pointing us toward cutting asset purchases in the next few months.

The third railFree exchange / The Economist
The thrust of Mr Bullard's argument here is pretty straightforward. The Fed is seeking (ostensibly) to maximise employment subject to an inflation constraint. If the inflation constraint looks less binding, then whatever policies were previously being used in pursuit of maximum employment should be deployed more aggressively

How did we get here? A "map" of the Fed's balance sheet's historySober Look
People have trouble distinguishing between the liquidity facilities provided by the central bank and the various monetary expansion activities.

Fed's Plosser says jobs report another reason to trim QE3Reuters
The latest jobs report on Friday showed that government spending cuts have so far not been as damaging as some feared, Philadelphia Fed President Charles Plosser said, adding it only entrenched his opinion that the Federal Reserve should reduce its bond buying "now".

How Will the Fed Trim Bond Purchases?WSJ

Why the Fed Hates the Word ‘Tapering’WSJ

BofAML: The Good, Bad, And Ugly "Taper" ScenariosZH

More Tapering TalkTim Duy’s Fed Watch
Fed is looking to pull back on asset purchases.  They expect the data to give them room to do so.

Let 'er rip, Mr BernankeFree exchange / The Economist
Better American fundamentals should make monetary policy more effective and give the Fed more room to ease, but the Fed instead seems to want to use them as an excuse to tighten (or to passively accept tightening). That's not good.

On SeptemberTim Duy’s Fed Watch
As always, the data will drive the Fed's next move.  My expectation is that data evolves in such a way that policy will shift in September.  I think there is currently a bias toward ending QE, so I anticipate a willingness of policymakers to focus on stronger numbers and downplay the importance of weaker numbers.

Why The Fed’s Not Tightening Any Time SoonPragCap

Fed’s Williams Open to Trimming Bond PurchasesWSJ
He is open to cutting the central bank's bond-buying program over coming months, as long as the economy continues to make good progress.

Fed’s Lockhart: Nearing Time to Trim Bond PurchasesWSJ
The Fed is nearing the day where it can consider reducing the size of its bond-buying stimulus effort, but even when that happens, smaller-sized purchases are unlikely to be the major shift in policy some think them to be, a veteran U.S. central bank official said.

Taper bomb-proofingalphaville / FT
If or when the Fed starts to taper, where will the pain land first? Barclays analysts Guillermo Felices, Michael Gapen and Sreekala Kochugovindan have taken a shot at answering that question expecting the Fed to start backing itself out at the start of 2014

The New Tapering Normal Optimism In ChartsZH
That all the increase in risk assets has been on the back of multiple expansion for the past year is by now not news to anyone. What may come as a surprise to some who have not been paying attention, as Morgan Stanley conveniently reminds us, is that corporate profits have been declining not for one or two quarters, but for two full years now.

The Fed's tricky messaging: Tapering is not tighteningWonkblog / WP
Rosengren’s comments signal yet another way the Fed could tailor its bond purchases to the economy and do more with less. Maybe not only is tapering not the same as tightening, but tapering could eventually lead to more easing.

Fed Not Constrained Amid Tame InflationWSJ
Inflation is getting tamer, a development that will surely fuel the debate over the Federal Reserve's bond-buying.