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The Holidays are coming, but is Tapering?

The US Federal Reserve currently purchases $85 a month of assets, combined with low interest rates to help stimulate economic growth. The markets speculation as to when the Fed will begin to Taper, this programme of quantitative easing has some believing it could be on Wednesday at 2pm.  The main focus for traders this week, before the holiday lull, will be does Bernanke start tightening at his final meeting as Chair of the Fed, before Janet Yellen takes over.

The markets are awash with cheap money from the quantitative easing and artificially low interest rates, however the effectiveness of this is begin to diminish. The recent economic data from the US, shows improvements in consumer spending and the employment, however the concern is that tightening will crush these green shoots of economic recovery.

The timing of the QE exit is crucial, and some analysts do believe that now is the time. If Bernanke does reduce the current level of bond purchases on Wednesday, the amount is likely to be nominal, however it will ease the transition and pave the way for Yellen to continue. 

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