Tapering of US Fed's QE unlikely: professor
By Ted Chen, The China PostTAIPEI, Taiwan -- Following the U.S. Federal Open Market Committee's decision to extend quantitative easing (QE) measures unchanged at a monthly scale of about US$85 billion, Taiwanese scholars and analysts yesterday predicted that existing monetary policy will hold steady for the near future, with little likelihood of a previously speculated tapering of bond purchases.
September 20, 2013, 12:21 am TWN
According to analysts, the Fed's monthly US$85 billion QE purchasing is comprised of Treasury Bonds and mortgage-backed securities.
However, the U.S. Treasury bills had in recent periods seen a dramatic rise in bond yields, and rapidly decline in face value, said Norman Yin (殷乃平), professor at the Department of Money and Banking, National Chengchi University. Yin cited statistics that on Sept. 6 the 10-year Treasury Bond yield rate had surged 3.005 percent, the highest seen since July 27, 2011.
In addition, citing market rumors, Yin stated that the Fed's decision to persist current QE measures is a move designed to maintain the value of government bonds, in order to assist the U.S. Treasury Department's intent to liquidate its holdings of government bonds, in an attempt to reduce its share of fiscal burden.
Once started, it is difficult to alter the course of ongoing QE measures, said Yin.
Meanwhile, Liang Kuo-yuan (梁國源), president of Taipei-based Polaris Research Institute (寶華綜合經濟研究院), stated that the Fed's hesitancy in tapering off QE measures is indicative of converns over the pace of economic recovery in the U.S.
The Fed had slashed GDP growth to 2 to 2.3 percent, lower than its June estimates of 2.3 to 2.6 percent.
Liang described the QE measures akin to a strong regimen for an ailing patient, and that extra care must be given when determining the schedule when the medication may be discontinued.