Look Ahead: Will Fed Governors Taper or Not?

federal reserve fomc taper Wall Street
Richard Drew/AP
By Kate Gibson

Will they or won't they?

The taper question is certain to dominate markets again Tuesday, as the Federal Open Market Committee begins its two-day policy meeting. Given virtually all market strategists believe it's not a matter of if, but when, the ongoing debate is largely one of timing, with virtually all in agreement that the Fed will make a move between December and March.

What the market wants, and how it will react, is harder to predict, especially given Wall Street's response to economic reports has been inconsistent of late.

"There is little consensus whether good news is good or bad right now, with the indicators that I watch showing everything from fully bearish to fully bullish," said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research.

An upbeat November jobs report sparked a rally in equities on Dec. 6, yet a week of mostly solid economic data drew a negative reaction from the stock market in the week that followed.

"It doesn't make a lot of sense.
If good news is good news, it needs to stay that way," said Frederick. "Given the mixed indicators, I am not sure we know what the market wants."

"Debate will be running high through mid-day Wednesday about whether the Fed tapers or not at this FOMC meeting. If the averages trade higher today, tomorrow and Wednesday morning, then it could become a 'sell on the news' no matter the decision," Elliot Spar, market strategist, at Stifel, Nicolaus & Co., wrote in emailed comments Monday afternoon.

While arguments can be made for the taper to begin sooner rather than later, Frederick believes the fact that core inflation remains well below the Fed's 2 percent target rate will give it room to delay cutting its asset purchases, and puts the odds of a December move at less than 50 percent.

Frederick is less confident about making a prediction on Wall Street's reaction, whatever the Fed decides: "I think we'll get a big move, I just don't know in which direction."

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Bernanke created the crazy mess we currently have, and he really has no idea how to undo his own mess. But, he won't let the tapering start at the end of his term. He will leave that slimy can of worms for Yellen to inherit.

December 17 2013 at 6:58 PM Report abuse rate up rate down Reply

They want 0% interest rates so they can borrow more. They want what they call \'moderate\' growth. They want for the whole strategy to have been worthwhile. Not happening.
It\'s time for the market to grow up, take their hit, and get back to financial sanity. Then, surprise, it\'ll happen by itself.

December 17 2013 at 10:04 AM Report abuse -1 rate up rate down Reply
Ralph Wetzel

Core inflation is NOT below 2% count that **** as it should be counted and you'll see were around 9%
But I guess these people don't shop or drive. Or expect everyone to just believe.

December 17 2013 at 6:49 AM Report abuse +2 rate up rate down Reply
1 reply to Ralph Wetzel's comment

My local gas station is selling gas for 2.99. That is lower than it has been.

December 17 2013 at 11:13 AM Report abuse rate up rate down Reply