How the Fed Can Do a Taper Without Causing a Tantrum

The strong jobs report on Friday seems likely to accelerate the discussion about the eventual wind down of the Federal Reserve’s asset purchases. Since the crisis hit in early 2020, the Fed has been buying $120 billion worth of Treasuries and mortgage-backed securities a month. And at some point, these purchases will likely be tapered down before ceasing completely.

Of course, the idea of starting to taper makes some people nervous, as it calls to mind the tantrum in 2013 when the Fed did exactly this and yields shot up, causing a considerable bout of market volatility.