Remember when the announced goal of quantitative easing (QE) was to reduce the unemployment rate to 6.5%?
Not really. While new Fed Czar Janet Yellen talks about continuing tapering, many believe that tapering will stop and some believe she may reverse direction and increase the rate of bond buying. Even if The Fed continues to cut back bond purchases by $10 billion a month, it will still take more than six months for QE to end. Minutes of the Federal Open Market Committee’s January meeting, which were released this week, suggest that the final taper would take place in October 2014.
More specifically, the minutes say, “Several participants argued that, in the absence of appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of $10 billion at each FOMC meeting. That said, a number of participants noted that if the economy deviated substantially from its expected path, the Committee should be prepared to respond with an appropriate adjustment to the trajectory of its purchases.”
Tapering aside, does anyone really think the unemployment rate is really decreasing?