Fed Signals Tapering Could Start Soon
November 21, 2013
The economy is strengthening and a tapering of the Federal Reserve’s stimulus program is still on the horizon, Fed Chairman Ben Bernanke said this week in a speech for the National Economics Club.
Bernanke said that even as the Fed begins to retreat from its $85 billion-per-month bond-purchasing program — which has been helping to keep mortgage rates low — it would likely maintain the bulk of the campaign for several years to come. Bernanke again refused to directly address a timetable for the Fed’s tapering to begin, but some reports say that, based on other recent remarks by Fed officials, the tapering could come as soon as December.
The Federal Open Market Committee, which sets policy, “still expects that labor market conditions will continue to improve and that inflation will move toward the 2 percent objective over the medium term,” Bernanke said during the speech. “If these views are supported by incoming information, the F.O.M.C. will likely begin to moderate the pace of purchases.”
The minutes of the Federal Reserve’s policy meeting last month also hinted that a tapering of the Fed’s economic stimulus is coming soon, despite experts noting that “the housing sector slowed somewhat in recent months, and [budget cuts and tax increases] were restraining economic growth."
The bond-purchasing program has been helping to keep long-term interest rates low for borrowers in recent years. But interest rates have already started moving up since the Fed announced months ago that it was eyeing a timeframe to being tapering. Since this summer, 30-year fixed-rate mortgages have moved up almost a full percentage point, from around 3.5 percent to 4.35 percent, Freddie Mac reports.
Bernanke is expected to step down from his role as Fed chairman at the end of January. The Senate Banking Committee will be voting Thursday on the nomination of Janet L. Yellen, the current Fed vice chair, as Bernanke's replacement.
Source: “Citing Fed’s Efforts, Bernanke Says U.S. Economy Is Growing Stronger,” The New York Times (Nov. 19, 2013) and “Fed minutes point to tapering 'in coming months,’” USA Today (Nov. 20, 2013)
Updated: June 21, 2018