Wednesday, September 18, 2013

To Taper or Not

The FOMC, the Federal Reserve's policymaking branch, is expected to issue a statement shortly once it holds its anticipated meeting. For sometime now, the Federal Reserve has been considering weaning off its bond buying strategy, what is now known as 'tapering', for anyone interested in keeping up with the latest jargon. Whatever the FOMC decides is expected to rattle and shake the stock market. Depending on how investors take the news, stock averages can either rise or fall by the end of the day. 

As the New York Times explains, this decision comes in the midst of a leadership change. As I wrote yesterday , the current Reserve chairman, Ben Bernanke, will be stepping down soon. The expected contender is Janet Yellen, who is now serving as vice-chair. Although her nomination has been welcomed by most of the press and politicians, President Obama has not officially named her as the chairwoman. Instead, after his top choice announced he did not want the position, there was talk of the president considering others for the job. 

Its worth noting that if elected, Yellen will be the first woman to head the Reserve, so the final selection has everyone sitting on the edge of their seats. More importantly, her leadership style has been scrutinized. Although believed to be the ideal woman for the job, she was behind the Fed's bond purchasing that had the   media and economists in a frenzy. 

While it would be nice to see another woman holding a high prestigious position, which I'm sure many gender equality advocates are hoping would persuade President Obama's final decision. Special interests aside though, choosing the right (wo)man for the job should be the deciding factor. 


Bernanke issued a statement sometime after the Reserve's meeting yesterday, asking Congress to resolve the budget showdown. He stated that raising the debt ceiling, as Replicans are demanding, and the delay in passing an official budget will lead the country to dangerous territory. He forecast a government shutdown and deeper cuts in funding.

 Nice try, but neither party is budging. It won't be any surprise if his pleas for cooperation are ignored. Bernanke has pissed many politicians off with his bond purchase strategy.  Besides, President Obama recently said he will not cave in to the demands for increased spending, and now there is fear that welfare payments will be cut. 

And so it goes, for now. Or as Bernanke and other economic figures are predicting, here it stays: at the stagnant growth and uncertainty of the past 13 years.  

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