Ben Bernanke and the Federal Reserve have long been talking about tapering. Today it finally happened — the Federal Reserve will reduce its bond-buying program to $75 billion per month. This will result in a $10 billion a month cut to start, with more tapering to surely come over the next several months.
So why did the Feds decide to finally do this? They have actually been throwing the idea around for a while. The current $85 billion per month Quantitative Easing program has been in place for quite some time, and Americans have used it as a serious crutch over the last year. What was supposed to be a stimulus program for the United States turned into something that most investors and traders thought they couldn’t live without.
Now, after months and months of warnings, and despite all the complaints, the Feds are going to move forward with the tapering program, because they feel that the economy is strong enough to start to recover more on its own.
We should see more tapering coming in 2014, as noted above. How much at once? How often? We don’t know all the details yet, but what we do know is that tapering is here and it is happening.
With the Feds looking to end the entire QE program after a while, here are a few things you need to know, taken from Time Business & Money:
Things to Know About Tapering and the End of the QE Program
- It could mean a market correction, but it doesn’t have to herald a crash.
- We’ll see a flight from risk.
- Interests rates will eventually rise, but not immediately.
Sources: Time Business and Money