It’s Called The Bond Taper. Yes, It’s Geeky. But This Is Why You Should Know About It



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A board on the floor of the New York Stock Exchange displays market prices on March 11, 2020 in New York City. The Dow Jones Industrial Average plunged more than 1,400 points that day as coronavirus cases rose around the world. The Federal Reserve soon responded with massive support to markets, but it may soon start to take away some of that help.

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Federal Reserve Chairman Jerome Powell appears for testimony before the Senate Banking, Housing, and Urban Affairs Committee on July 15, 2021 in Washington, D.C. Among the key decisions for the Fed is when to start withdrawing some of the stimulus it has provided to markets during the pandemic.

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Then-Fed Chair Ben Bernanke testifies before a Senate Joint Economic Committee hearing on May 22, 2013. On that day, Bernanke revealed some of the Fed’s thinking at the time about removing some of the support it had provided to markets, sparking a big global sell-off.

Manuel Balce Ceneta/AP


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Manuel Balce Ceneta/AP

Then-Fed Chair Ben Bernanke testifies before a Senate Joint Economic Committee hearing on May 22, 2013. On that day, Bernanke revealed some of the Fed’s thinking at the time about removing some of the support it had provided to markets, sparking a big global sell-off.

Manuel Balce Ceneta/AP

So what will the taper look like?

This is the $1 trillion question.

Markets know how tapering is supposed to work in principle. The Federal Reserve will have to start reducing its asset purchases until it stops buying them altogether.

But investors don’t know key details yet, like when the Fed will start buying fewer bonds and securities, and how exactly it is going to scale back its purchases.

There’s multiple ways to do so. The Fed, for example, could stop buying mortgage-backed debt first given the concerns about housing prices.

So when can we expect some guidance from the Fed?

Perhaps as early as this week.

Powell is due to give a speech on Friday morning, though he has not said what he will discuss.

The theme of this year’s conference, which is attended by central bankers from all over the world, is «Macroeconomic Policy in an Uneven Economy.»

If Powell decides not to offer any specifics about tapering, the next opportunity for him to do so would be in a few weeks, at the Federal Reserve’s next policy meeting on Sept. 21-22.

  • Tapering
  • Jerome Powell
  • mortgage-backed securities
  • Treasury Bonds
  • Wyoming
  • inflation
  • Federal Reserve
  • interest rates
  • Federal Reserve Board
  • Federal Reserve System



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