Everybody is speaking about the tapering of the Quantitative Easing program, but nobody has any concrete and reliable piece of information. If we are to consider the macroeconomic indicators that describe the U.S.’s economy, it is difficult to take any position. The data is mixed. On one hand, the labour market seems to be giving real signs of improvement, on the other hand, we cannot trust only one set of data. An information that can be trusted is the FOMC Member Bullard’s speech. It looks like between the FOMC members, the only measure which was discussed so far, about the tapering of the QE3, is the starting of discussions about possible plans for reducing the pace of asset purchases. Another thing that we know for sure, is that no final decision will be taken unless the end of the year will meet the same positive results that were met at the end of the first half of 2013. In the best case scenario, the September’s meeting might bring a set of pans, which will be implemented next year, according to the economic conditions.
The main findings of the Bullard’s speech are the following:
- Any decision concerning the Quantitative Easing program is separated from any decision concerning the policy rate;
- There are discussions on whether or not a wider range of labour market indicators need to be taken into consideration, decreasing the importance given to the present key indicators ( the unemployment rate and payroll employment growth);
- FOMC will have to decide if, in taking any tapering decision, it is important to consider the weak evolution of the GDP (starting with the beginning of 2013) or is better having sight of the future evolution, which is expected to be improved, and to trust this presumption?
- The size of the Fed’s balance sheet might pose questions about the most appropriate moment of tapering;
- The inflation is low. In such an environment, the FOMC might remove the policy accommodation;