The talk is of tapering, and it’s making investors nervous.
The Federal Open Market Committee (FOMC) released the minutes of its April meeting last week. The report suggested that should the economy continue to make progress, it may be time to adjust the pace of the Fed’s monthly bond purchase program.1
With inflation appearing to accelerate, this is the first sign that the Fed is considering such a scaling back. While such a change might be inevitable, it comes with no timetable and no indication that the tapering is imminent.
This doesn’t calm investors’ nerves. The markets had a quick reaction to the tapering chatter, but soon resolved. Memories cast back to the so-called Taper Tantrum of 2013, when the Fed similarly changed direction after years of boosting the economy with easy money. Such mini-dips have happened from time to time since then.2
In addition to its other duties, the Fed has been given the mandates of maintaining stable price levels and maintaining moderate, long-term interest rates. Financial strategies need to be crafted with the understanding that the Fed from time to time will make adjustments in interest rates to accomplish its goals. Worried about your financial strategy? Give us a call, we are happy to answer any questions you may have.
1. CNBC.com, May 19, 2021
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