And yet another post-mortem opinion, this time from the man who meets every month [6]or so with Goldman's the NYFed's Bill Dudley at the Pound and Pence [7]in FiDi: that of Goldman's Jan Hatzius.
The most notable statement made by Bernanke during the Q&A session was that the FOMC could potentially cut the pace of QE purchases "in the next few meetings," although this was predicated on a continued improvement in the outlook for the economy and confidence in the sustainability of that improvement. He also stated that the purchase pace will depend on incoming data and that the FOMC could either raise or lower the pace of purchases in the future. Our view continues to be that the December meeting and subsequent press conference is the most likely time that the Committee would announce QE tapering, although September is a possibility if the economy picks up more than we expect in coming months.
2. On the strategy for winding down the Fed's portfolio, Bernanke noted that the Fed could exit without selling securities (in contrast to the June 2011 exit principles which prescribed asset sales), consistent with the recent trend in Fed communication on this topic.
3. Bernanke's prepared remarks were very much in line with recent communications from the Fed leadership. He acknowledged the gradual improvement in the labor market, but stressed that the labor market remains weak and allocated a considerable amount of time to discussing fiscal drag. Bernanke reiterated an argument which he has made in the past, that raising interest rates prematurely could choke off the recovery, ultimately resulting in a longer period of low interest rates.
But... but... Hilsenrath just said attempting to predict the tapering, pardon, the slow down of $80 billion in monthly flow is futile and meaningless!? (incidentally we think it will be September: just after the Bernanke-free Jackson Hole meeting and right around the time the US debt ceiling is hiked again, following much theatrical kicking and screaming from all sides).
Or is this just another "distract with BS" script, while the oligarchy continues to quietly convert paper assets that have never been more expensive into oh so very cheap real ones?