Taper talk

The Taper and Its Shadow: Central Bankers Need to Explain the Risks of Further Quantitative Easing by DeLong

They are not saying that they will break their promises not to prematurely raise interest rates. But they are saying that their tolerance for continuing to enlarge their balance sheets by purchasing long-term bonds for cash is very limited[.] Indeed--the so-called "taper". The problem is that financial markets simply do not believe the central bankers when they say that a present desire to "taper" is completely unconnected with any future desire to raise short-term interest rates. Financial markets thing, not unreasonably, [t]he same central bankers grasp for excuses to cut off quantitative easing now will also grasp for excuses in the future to say that things have changed and that forward guidance promises should not be kept. And financial markets will think this unless and until central bankers come up with reasons for believing that further extensions of quantitative easing do in fact run substantial risks.

So let us try to help central bankers explain why the [t]aper now is unconnected with future forward-guidance promise breaking. Let us listen for the reasons that further enlargement of North Atlantic central bank balance sheets carries substantial risks:

[Silence...]

The Key To Power At The Federal Reserve? Running The Meetings by Joe Gagnon (sort of)

(via DeLong)