COLUMN-A taper is whatever the market says it is: James Saft
By James Saft
Dec 18 (Reuters) - Coming months will answer decisively a
Federal Reserve insists is already settled: is a
tapering a tightening?
Score one for the Fed today: it cut purchases of bonds to a
monthly $75 billion from $85 billion, but paired the move with a
confection of sweeteners which touched off a startling rally in
equities and only a small increase in long-term interest rates.
"Tapering is not meant to be a tightening," Bernanke said
after the Federal Open Market Committee announced the move.
"The Federal Reserve means to keep the level of stimulus more or
less the same."
To judge by the reaction of the stock market - with the Dow
Jones Industrial Average closing up 292 points - the
moves the Fed announced must qualify as a loosening.
That may be because in addition to shaving $5 billion per
month off of the amount it buys of both Treasuries and mortgage
bonds, the Fed hardened forward guidance to indicate that rates
could remain near zero "well beyond" the time unemployment drops