Tapering was expected to begin in September/October 2013 but was delayed by the Federal Reserve (“Fed”) due to economic uncertainty and instability. Towards the end of 2013, the Fed announced, however, that they would begin tapering their bond buying by $10 billion to $75 billion a month starting in January and will continue to do so upon signs of an improving economy. We expect tapering will continue throughout 2014 and will likely be completed by the end of the year, recognizing that the Fed is scheduled to meet 8 times in 2014 as of this point in time. After tapering, we anticipate bond sales (i.e. federal balance sheet reductions) beginning in early 2015 and the initial stages of a protracted and measured period of Federal Funds Target Rate increases during the second half of 2015. In this regard, we believe that the Fed will follow a similar blueprint to the one they employed in 2004 – 2006 when they raised this key interest rate by 25 Basis Points (0.25%) on seventeen different occasions over this three year time period.Read more
