قالب وردپرس درنا توس
Home / Business / Powell felt "tap-tantrum," but urged the Fed to trade anyway, show newly released transcripts from 2013

Powell felt "tap-tantrum," but urged the Fed to trade anyway, show newly released transcripts from 2013





Bloomberg News / Landov

Stock prices fell and bond yields rose in June 201
3 in a market event now known as the "tapering tantrum" after former US Federal Reserve Chairman Ben Bernanke announced that it would boost the economy.

Jerome Powell, while serving on the Fed Board before appointing Chairman Ben Bernanke, called for a withdrawal of efforts to revive the economy, although he sensed that volatility could be slightly greater on the financial markets, according to the minutes the Federal Reserve 2013 meeting, which was released on Friday.

"We have to jump," Powell told Bernanke and his colleagues.

The issue was about the third round of the Fed's purchase program known as QE3, which has been in progress since last September. The US Federal Reserve bought $ 85 billion a month in Treasury and mortgage-backed securities in an open program.

Outside public opinion, Powell was one of the "three Amigos" who felt uncomfortable with the purchases. "As Jay told me, we needed an" exit ramp, "Bernanke reported in his memoir," The Courage to Act. " Powell pushed for an "exit ramp."

See a: What a Jerome Powell Fed Means to Investors and the Economy

This view of "tapering" purchases increasingly received support from Fed officials in the early months of 2013, however, the market largely went unnoticed.

The Fed had a plan where Bernanke wanted to mention during his press conference that the central bank intended to reduce asset purchases later in 2013.



Reuters

Fed Chairman Powell with former Fed chiefs Janet Yellen and Ben Bernanke

Bernanke in principle commented on the market The reaction should be positive as uncertainty is reduced.

"Any conversation that begins by saying how we're going to lower the buying rate is likely to have a negative impact in the short term. He said a after the transcripts.

"The more time I have spent with markets, the less I believe in my own ability to predict them."


Jerome Powell, then governor of the Fed and now its chairman

Powell was thrilled despite the risks. He said it was time to give the market a "roadmap to reducing purchases," as the Fed was still buying assets, even though the economy was improving.

"The question is, to which roof do we jump over which lane? So there is no risk-free way. This is the best way, and I am glad that we landed on it, "he said. "I'm not worried about a bit of volatility, but I'm worried there may be more," Powell said, adding that he was frustrated in his attempts to gauge the market's response.

The more time I spend on markets, the less I believe in my own ability to predict them, "Powell said.

Bernanke's announcement struck the market like lightning

DJIA, -0.29%

collapsed and the bond yields dropped

TMUBMUSD10Y, -1.70%

reached a full percentage point. The episode became known as the "Taper Tantrum."

The episode fundamentally changed the way the Fed conducted its accounting policy.

In 2016, Fed Chairman Janet Yellen cited the Taper Tantrum as a reason not to tighten monetary policy by shrinking its balance sheet. Instead, the Fed turned to raising its traditional short-term interest rate instrument.

Read: Yellen explains why the Fed has not cut its balance sheet to tighten policy.

It was only when interest rates had risen that the Fed launched a program to reduce its asset purchases.

The transcripts issued by the US Federal Reserve five years later each year indicate that pigeons at the June meeting argued for delaying the announcement of a reduction in purchases.

"I do not see the situation at this stage as an emergency," said Minneapolis Fed President Narayana Kocherlakota.


Source link