, Columnist
When the Fed Tapers, the Market Will Have a Tantrum
The best the central bank can do is be prepared to limit the economic fallout.
Just doing his job.
Photographer: Daniel Acker/BloombergThis article is for subscribers only.
At some point, when the U.S. economy looks strong enough, the Federal Reserve will have to scale back its efforts to stimulate growth by buying large quantities of government securities. Announcing such an intention, however, will risk repeating the “taper tantrum” of 2013, when then-Chair Ben Bernanke’s mere suggestion of such a move sent bond yields sharply higher and precipitated big losses for their holders.
Unfortunately, there’s little the Fed can do to prevent another taper tantrum. The best it can do is be prepared and communicate clearly and consistently.