Has Bernanke Gotten the Story Right?
The most important point in Ben Bernanke’s Wednesday press conference was the announcement that the Fed will adjust the amount of monthly bond purchases according to economic conditions. In other words, an improving economy with stronger payrolls and lower unemployment could lead to a decline in Fed bond buying, from $85 billion a month to something gradually lower, so long as the economy keeps looking better.
It won’t happen all at once. The Fed is not convinced that the current economic upturn is truly sustainable. But Bernanke is implying that the Fed may become less easy in the second half of this year, perhaps ending QE in 2014.
Read my full column here.