Wednesday, January 08, 2014 – Tapering is Not Tightening

Tapering is Not Tightening by Sinclair Noe DOW – 68 = 16,462SPX – 0.39 = 1837NAS + 12 = 416510 YR YLD + .06 = 2.99%OIL – 1.15 = 92.52GOLD – 5.90 = 1226.90SILV – .32 = 19.62 Repeat after me: “tapering is not tightening.” This is the new mantra of the Fed; tapering is not tightening. Today we got the minutes of the Fed FOMC policy meeting of December 17-18, and one of the themes is that the policy setting members of the Fed want to proceed with caution in trimming asset purchases and tapering is not on a rigid preset course; it is subject to incoming economic data and tapering is not tightening. You will recall that the Fed announced it would cut purchases by $10 billion per month, while still making $75 billion a month in purchases of mortgage-backed securities and Treasuries. The minutes reveal “concern about the potential for an unintended tightening of financial conditions if a reduction in the pace of asset purchases was misinterpreted as signaling that the committee was likely to withdraw policy accommodation more quickly than had been anticipated.” So, it’s just a little tapering, not tightening. That said, even the more dovish policymakers had to concede that QE does not pack the punch it might have once packed. From the minutes: Regarding the marginal efficacy of the purchase program, most participants viewed the program as continuing to support accommodative financial conditions, with a number of them pointing to the importance of …