FOMC Meeting: Fed Just Backtracked on QE Taper Talk

The Federal Open Market Committee (FOMC) meeting ended today (Wednesday) with word that the Fed plans to the stay the course on QE for now, backtracking from earlier hints it might begin tapering this fall.

"For all those looking for clear guidance on when quantitative easing will end, well, you will have to wait a little longer," Joel Naroff, president and chief economist at Naroff Economic Advisors Inc., wrote in a research note. "Indeed, there may have been some walking backwards today."

Money Morning Capital Wave Strategist Shah Gilani said it's no surprise the Fed has backed away from talk of tapering.

"There's no way the Fed, after ratcheting up the stock market and subduing bond yields in a massive momentum-upon-momentum loading up on bonds, is going to allow that trajectory to reverse itself," Gilani said. "The first statement about tapering was nothing more than a trial balloon. They wanted to change the discourse in the market and see if it reacted to nothing more than taper talk. They got a shock to the system. They weren't happy about that. That's because they aren't that tuned in to how fragile a situation they've created," he said.

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FOMC Meeting: The Fed is "Winging It"

Notably, after the two-day FOMC meeting, the committee said in its statement that economic activity had expanded at a "modest pace" in the first half of the year, in contrast to its more positive June assessment of "moderate" growth.

"They walked back the taper talk because it infringed on their momentum play. Now, they're saying they are not done with the Full Monty buying show since they only see modest, not moderate growth in the economy," Gilani said.

The Federal Reserve's policy-making committee noted unemployment has dipped, but remains elevated, and that longer-term inflation expectations have remained stable.

Financial consultant Bert Ely says it's clear the committee doesn't know what to expect with inflation or unemployment.