Carmen Reinhart: Tapering Now Is A Pretty Bad Idea

Markets are pretty much convinced that the Federal Reserve
will begin curbing its bond-buying program this month.

In a new interview with Euromoney Magazine’s Sid Verma, Harvard econ professor Carmen Reinhart says that pulling the trigger on a “Sept-taper” is not a good idea, because too much of the global economy remains in limbo:

We still have a great degree of deleveraging to endure in the US, and the issues around the world, particularly in Europe, are far from resolved.

She also slaps the Fed for muffing its taper roll-out, inadvertently roiling markets:

The Fed probably signaled more to the markets than it intended [in recent meetings]…The communication was problematic.

We all know how Reinhart feels about debt-to-GDP ratios (high ones should be avoided at all costs).

But she’s actually been pretty neutral on the current spate of central bank dovishness.

In an interview with Der Spiegel in April, for instance, she said the banks’ new role as defacto fiscal policy makers was probably a necessary evil:

I am not opposing this change, I am just stating it. You have to deal with the debt overhang one way or the other because the high debt levels are an impediment to growth, they paralyze the financial system and the credit process.

These new comments seem to push the needle beyond “acceptance” of easing into outright advocacy.

Read the full interview on »

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at