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As the Fed's playbook stands now, there will be a $25 billion monthly purchase of agency mortgage-backed securities (MBS) and long-term treasuries until the September meeting, when that number will be tapered to $15 billion. And, as minutes from June's meetings suggest, that last $15 billion will be cut and the policy of quantitative easing will end after the meeting on October 29.
The policy of bond buying began in September 2012 as a way to put downward pressure on long-term interest rates and pour more money into the markets at a time when the U.S. economy needed a quick boost amid a slow-growing, post-recessionary period. It began as a monthly purchase of $45 billion in treasuries, and $40 billion in agency MBS, for a total of $85 billion in total asset purchases.
It wasn't until December 2013 that former Fed Chairman Ben Bernanke announced that this stimulative policy would begin winding down with a $10 billion reduction in these purchases. With every Fed meeting to follow, another $10 billion would be cut from the purchases until the program was ended altogether.
The only change to that script came in the minutes from June's meeting, which revealed that rather than cut $10 billion in October's meeting and continue purchasing $5 billion worth of assets every month until a final round of reductions came at the end of the December meeting, the Fed would just cut the final $15 billion after the October meeting.
All in all, the announcements out of the Fed have been predictable, and current Fed chairwoman Janet Yellen has continued to follow the same path that her predecessor Bernanke handed her when he departed from the post in February.
But even the predictable Fed talk can be felt on Wall Street…