Wall Street Journal reporter John Hilsenrath is so plugged in at the Federal Reserve that he has earned the nickname “Fed Wire.”
Whenever the Fed wants to start sending a new message to Wall Street, the story goes, they call up John Hilsenrath.
And then, thanks to Hilsenrath’s excellent articles, by the time the actual announcement comes out, it’s no big deal, because everyone already knows about it.
And now John Hilsenrath is reporting that the Fed has started talking about when and how to end its latest economic stimulus program:
Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy—an effort to preserve flexibility and manage highly unpredictable market expectations.
Officials say they plan to reduce the amount of bonds they buy in careful and potentially halting steps, varying their purchases as their confidence about the job market and inflation evolves. The timing on when to start is still being debated.
So this is presumably the first step in the event that all of Wall Street has been waiting for… the end of the latest “quantitative easing” program and, thereby, the beginning of the Fed’s “exit” from the massive bond portfolio that it has built up over the past 5 years.
Some investors are concerned that, when the Fed starts selling bonds instead of buying them, interest rates will skyrocket (others vehemently disagree). And some of those worried investors, presumably, might conclude that the moment of doom is now upon us. So Hilsenrath makes clear that the Fed is very worried about not spooking the markets:
“I don’t want to go from wild turkey to cold turkey,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an interview Friday. “I think we ought to dial it back.” Mr. Fisher is part of a contingent of Fed hawks who are wary of the central bank’s easy-money policies.
The Fed also wants to transmit the message that the withdrawal of stimulus will not necessarily be smooth and steady. Rather, the Fed might tighten policy a bit, then wait to see what happens, then tighten some more.
In any event, it seems the big moment is finally upon us. The Fed is finally serious enough about starting its “exit” that it is telling Wall Street to get ready.