Oct 17 (Reuters) – Like corded telephones, it is looking
like our grandchildren will someday need to have the concept of
rate hikes explained to them.
Seriously, someone needs to put a Federal Reserve statement
with an interest rate hike into a time capsule so future
civilizations can know that once upon a time monetary policy
could become something known as ‘tighter’.
And as for the taper, which only recently we were expecting,
that too may take quite a while.
In fact, now that we have what passes for a budget deal in
Washington, we, and the Fed, can get on with the important
business of counting the four top reasons not to taper.
REASONS NOT TO (EXPECT A) TAPER
1. There was never economic justification.
There probably wasn’t sufficient justification to tighten
conditions back in August, before this mess transpired.
Inflation was too low and job growth and labor force
participation too anemic. Tightening now would require some new,
positive reason, or an over-riding commitment to risk management
and bubble prevention.