On Tuesday, Federal Reserve Bank of Chicago President Charles Evans announced that he wouldn't be surprised if the central bank begins to taper its $85 billion monthly bond-buying program in September.
Evans is the third official this week to signal a QE taper. Richard Fisher, president of the Dallas Fed, and Dennis Lockhart, president of the Atlanta Fed, parroted Evans' sentiment.
While Fisher indicated he would prefer to cut back bond purchases in August, Lockhart stated a preference for a September QE taper, although the Fed could wait longer if economic growth and unemployment trends reverse.
But it is Evans' announcement that is the most important. Evans is a member of the activist wing of the Federal Reserve. These members strongly support unconventional monetary policies such as bond buying, which are designed to reduce borrowing costs to spur aggregate demand and hiring across the country.
His views reflect those of the majority of members of the FOMC, the Fed's monetary policy committee.
"We are quite likely to reduce the flow of purchases rate starting later this year – I couldn't tell you exactly which month that will be – and it's likely to wind down over time in a couple or few stages," Evans told reporters.
Despite the signs the Fed will begin a QE taper, Evans said the central bank will continue to maintain low interest rates until unemployment falls below 6.5%, a feat that likely will not happen until mid-2015.
In the meantime, the era of cheap money will extend until GDP growth reaches 3%, a figure Americans would welcome given the stagnate economy of the last two years.
Wiggle Room in Baked Numbers
Even if unemployment falls, the data behind the jobless figures does not paint the picture of an economy improving its health.
The 7.4% unemployment figure has been driven by two hidden points of data that most Americans ignore: the rise of part-time employment and the outright departure of millions of Americans from the U.S. labor force.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.