FOMC Minutes Reveal Taper Likely In "Coming Months"

Tyler Durden's picture

With the schizophrenia that seems to have availed across the FOMC members (hawks are doves, doves are hawks, tapering is not tightening, etc.) it is not surprising that the minutes reflect some confusion:


So summing up - when we get to an unknown point in the future with an unknown state of parameters, we may do an unknown amount of tapering - maybe possibly. Pre-Minutes: SPX 1791, 10Y 2.75, EUR 1.3444, Gold $1262

Key sections:

on taper in coming months as well as a Taper even if there is no economic improvement:

During this general discussion of policy strategy and tactics, participants reviewed issues specific to the Committee’s asset purchase program. They generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in la-bor market conditions and would thus warrant trim-ming the pace of purchases in coming months. However, participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent.

on the calendar scheduling of the taper:

Participants generally expressed reservations about the possibility of introducing a simple mechanical rule that would adjust the pace of asset purchases automatically based on a single variable such as the unemployment rate or payroll employment. While some were open to considering such a rule, others viewed that approach as unlikely to reliably produce appropriate policy out-comes. As an alternative, some participants mentioned that it might be preferable to adopt an even simpler plan and announce a total size of remaining purchases or a timetable for winding down the program. A calendar-based step-down would run counter to the data-dependent, state-contingent nature of the current asset purchase program, but it would be easier to communicate and might help the public separate the Committee’s purchase program from its policy for the federal funds rate and the overall stance of policy. With regard to future reductions in asset purchases, participants discussed how those might be split across asset classes. A number of participants believed that making roughly equal adjustments to purchases of Treasury securities and MBS would be appropriate and relatively straightforward to communicate to the public. However, some others indicated that they could back trimming the pace of Treasury purchases more rapidly than those of MBS, perhaps to signal an intention to support mortgage markets, and one participant thought that trimming MBS first would reduce the potential for distortions in credit allocation.

on lowering the IOER:

Participants also discussed a range of possible actions that could be considered if the Committee wished to signal its intention to keep short-term rates low or rein-force the forward guidance on the federal funds rate. For example, most participants thought that a reduc-tion by the Board of Governors in the interest rate paid on excess reserves could be worth considering at some stage, although the benefits of such a step were generally seen as likely to be small except possibly as a signal of policy intentions. By contrast, participants expressed a range of concerns about using open market operations aimed at affecting the expected path of short-term interest rates, such as a standing purchase facility for shorter-term Treasury securities or the pro-vision of term funding through repurchase agreements. Among the concerns voiced was that such operations would inhibit price discovery and remove valuable sources of market information; in addition, such operations might be difficult to explain to the public, complicate the Committee’s communications, and appear inconsistent with the economic thresholds for the fed-eral funds rate. Nevertheless, a number of participants noted that such operations were worthy of further study or saw them as potentially helpful in some cir-cumstances.

On lowering the 6.5% unemployment rate threshold:

As part of the planning discussion, participants also examined several possibilities for clarifying or strength-ening the forward guidance for the federal funds rate, including by providing additional information about the likely path of the rate either after one of the economic thresholds in the current guidance was reached or after the funds rate target was eventually raised from its cur-rent, exceptionally low level. A couple of participants favored simply reducing the 6½ percent unemployment rate threshold, but others noted that such a change might raise concerns about the durability of the Com-mittee’s commitment to the thresholds. Participants also weighed the merits of stating that, even after the unemployment rate dropped below 6½ percent, the target for the federal funds rate would not be raised so long as the inflation rate was projected to run below a given level. In general, the benefits of adding this kind of quantitative floor for inflation were viewed as uncer-tain and likely to be rather modest, and communicating it could present challenges, but a few participants re-mained favorably inclined toward it. Several partici-pants concluded that providing additional qualitative information on the Committee’s intentions regarding the federal funds rate after the unemployment thresh-old was reached could be more helpful. Such guidance could indicate the range of information that the Com-mittee would consider in evaluating when it would be appropriate to raise the federal funds rate. Alternative-ly, the policy statement could indicate that even after the first increase in the federal funds rate target, the Committee anticipated keeping the rate below its longer-run equilibrium value for some time, as eco-nomic headwinds were likely to diminish only slowly.

Full minutes (pdf)

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Cult_of_Reason's picture

We are in the major bubble because almost every bull (at peak of complacency) and every bear (and their mothers) believe there will be no taper anytime soon.

Of cause except the insiders (cronies and oligarchs), as Fink and iCahn, who know the taper is coming. Also there is talk (TNX and gold believing it) that Yellen has promised to Sen. Corcker to move forward with the taper.

nope-1004's picture

FED = Complete bullshit.  They should put a sign in the Federal Reserve foyer:  "Tomorrow we taper."


Cult_of_Reason's picture

Does your mother think the same?

Just curious...

nope-1004's picture

lol.... can you substantiate this "Yellen talk"?  Or are you just like the FED, spreading bullshit?

There has been no Exit Strategy.  There has been no Taper.  There has been no return to normal.  The FED is locked in a mode of keeping the ship from sinking.  Any of this talk of tapering that actually does happen will sink the bond market instantly.


Canadian Dirtlump's picture

if the taper does come, it will only to force a crash and for them to come save the day. The idea that the insiders will signal a taper to the masses is lunacy.

zaphod's picture

I would agree with you, but that would assume that the FED knows what it is doing.

We are at the point where talking about maybe printing less than $85B/month is considered to be tightening. There are no plans to actually print at a lower rate or even to not print at all, the only tool they have left is to threaten the markets that they could print less.

Say What Again's picture

How did Icahn know about this ahead of time?


Cult_of_Reason's picture

Re: "The idea that the insiders will signal a taper to the masses is lunacy."

Why would it be the lunacy when the signal came after the insiders had positioned for the taper (Fink is hedged and iCahn is net short)?!?

SDShack's picture

And how many times has an Icahn bet gone sour? Here's the answer. He doesn't always win. He isn't JPM or Goldman Sachs who never have a down day in months. Lots of hedge funds have been decimated taking the short bet. So your argument that these insiders know what is going on and are short doesn't hold up to their past success or lack thereof.

SDShack's picture

"Any of this talk of tapering that actually does happen will sink the bond market instantly."

Exactly correct. The bond market is the real threat. That means the real plan has to be to continue QE to monetize the US Debt until the point that the Fed controls at least 50% of the bond market. It's game over then, since the Fed will have defacto control of the bond market, and that threat is neutralized. We are witnessing a NWO relative to finances between private banking and govt. This is fascism to a whole new level.

max2205's picture

Down .5% on the spy....not much of a sell off

max2205's picture

30 yr near 4% but the ten isn't that close to 3%

Cult_of_Reason's picture

Re: "can you substantiate this 'Yellen talk'?"

Please see gold price action and 10-year... If 2%+ gold plunge is not enough evidence for you, then email/call to the offices of Yellen or Corker...

nope-1004's picture

Hey... I'm with ya..... Please see Caterpillar and AAPL.  Look at them on a 10 year chart.  They parallel Joe Biden's addiction to sniffing glue and Sarah Palin's love of panty hose.


Cult_of_Reason's picture
Bullard says bluntly what Bernanke had hinted: Taper may be coming soon


Via Bloomberg:  

Corker Says Yellen Gave Him Commitment to Scale Back Bond Buying

Bunga Bunga's picture

As I said before the first taper cancellation, taper is only rhetorics to

1) pretend that the recovery is successful

2) try tame the asset bubble 

3) increase the positive impact of actual actions


sixsigma cygnusatratus's picture

Nothing more, nothing less.  The "Taper" is a mythical creature invented by the Fed to keep the S&P from jumping to 10K by next month.  Just another trick in the magician's bag of many tricks. 

john39's picture

waiting for FED tapering = waiting for godot.

Ham-bone's picture

like waiting for foreigners to "dump Treasuries and the dollar"

BRICS holdings of US Treasurys from '06 up through Sept '13 (according to TIC)

'06 - $413 B

'08 - $778 B

'12 - $1.692 T

'13 - $1.761 T

Do these look like countries trying to "get out of the dollar"...can break down by country if anybody cares but suffice to say they all increased massively and (aside from Russia which is a little under it's '12 record high) are all @ record holdings...even during '12-'13 when US deficits reduced from $1.7 T of '09 to $700 B of '13...not even a roll off in holdings while Fed QE buys all new issuance...junk away haters of actual data that doesn't conform with your expectations (or logic of negative consequences for horrific policy)

SilverIsKing's picture

There will be no taper.  What will happen to the 10 year yield if they taper?

Aknownymouse's picture

But they will have to taper first so that everyone runs to them begging for the untapper.

F-Tipp's picture

There will never be a taper. Accepting the premise that it can actually happen is ridiculous.

DanTak's picture

Gold selloff with 2000 contracts. For me it seems that no one is selling anymore. Price goes down, but who will cover the short in one week. I guess  reversal is coming today night.

TruthInSunshine's picture

More blah blah blah to confuse, delay, obfuscate, and attempt to kick the toxic can that BernYellen has created further down the gutter that is our economic climate.

Open up & take your medicine, and just get it over with already. As it is, the patient is nearly dead now anyways thanks to your lack of decisiveness and inaction.

Lore's picture

Gold down $22.00.  Bullsheeit trumps fundamentals AGAIN.

How many lampposts in New York again?

Headbanger's picture







Catflappo's picture



Sesame Street buried amongst the Fed quotes - how appropriate

NOTW777's picture

non stop lying - river of lies

tickhound's picture

"Now that QE is off the table..."

TimTom's picture

Ha, good luck with that, morons. 

NOTW777's picture

the fed has been talking of "recovery" and "improvement" for 5 years ????

Bastiat's picture

Desperate lying cornered weasels.

asierguti's picture

And gold futures halted overnight for 20 seconds. Leaky leaky

pragmatic hobo's picture

it's fucking schrodinger's taper ...

Glass Seagull's picture



Deez niggaz and day policy gamma.  Create implied policy vol, dampen policy gamma which the economy is very, very short to the Fed's length. Extend tenor talk too, as abs val of ATM gamma is less "back there" in the future.




fonzannoon's picture

At some point they will draw a line in the sand with every treasury 2 years and in and go full blast QE on the short end. The long end will rise towards 4% but we will finance all debt rolling over for 0%  short term. Intermediate term bond bulls and long end of the curve bulls will get torched. 

pods's picture

Oh shit fonz, a line in the sand?  Is that like a red line?

What would happen if we crossed it?  :D


Dr. Engali's picture

They draw a new line......

Bay of Pigs's picture

That sounds credible and totally plausible. How much time will that buy them? Another year or two?

I never thought I'd live to see this kind of policy actually working.

fonzannoon's picture

It all works until the world dumps the dollar, and I know I probably piss everyone here off when I say this, but I just don't see any real evidence of that happening.

SDShack's picture

No, you are right. The world won't dump the dollar because TPTB can't let that happen. They have engineered the system so it can't happen. TPTB leaned from the 2008 Financial Crisis that they are all in this overleveraged derivative black hole together, and none can escape. So they will do whatever it takes to keep the system going. They are sociopaths so by definition they will violate any law, constitution. govt, company, business, person, friend, family, anything to protect their system. If it all starts to unravel, they will start WWIII to "save the world" in their twisted mind.

TomGa's picture

"I'll gladly taper Tuedsay for more QE today."

Kaiser Sousa's picture

the fucking moves n thed only to forms of real money PHONY PAPER PRICES is just fucking stupid....

GolfHatesMe's picture

Taper begins the month after the Fed owns ALL Bonds

ebworthen's picture

So Steve LIESman was confused by the FOMC minutes.


Steve my boy, you are confused because you are meant to be confused!

If they ever happen to taper it will be like the parent trying to wean the toddler off their pacifier; as soon as the little tike starts crying they will pop it back in their mouth and say "Oh, not ready yet I guess".

ShrNfr's picture


SheepDog-One's picture

'Taper on, taper off' banter now the Fed's main tool.

El Hosel's picture

...Main Tool? What about the golden monkey hammer?

Dr. Engali's picture

You would think that the robots would have caught on to the fact that the fed is just making shit up by now. Listen up robots.....the fed is never going to taper. They are trying to jawbone and manage a bubble.

Meanwhile the Bernank's games are blowing up the ten year.