Mark Your Calendar. It's Time for a Taper Tantrum
Eight years ago, almost to the day, emerging markets went haywire when the Fed began to talk about reining in post-financial crisis stimulus. We may be on the verge of a sequel.
Tantrum time.
Photographer: Drew Angerer/Getty Images North AmericaThe safety latch has been released on global monetary policy. Prospects that the Federal Reserve starts reining in stimulus are alive, and a troubling signal for Asian economies that took dramatic measures to support their recoveries.
Minutes of the Federal Open Market Committee’s April meeting, released Wednesday, suggest it’s increasingly plausible that the Fed begins to taper its $120 billion-a-month quantitative easing by year-end. This idea has been background chatter in Asian markets for a while, but was generally seen as a remote possibility. In the meantime, central banks around the region sought loose policies with impunity from investors. In Australia, officials adopted bond buying and yield-curve control, while debt monetization and a similar approach (in all but name) proceeded in Indonesia and the Philippines. South Korean officials could resist calls to pare their own accommodation. And China, far advanced in its recovery, could afford to talk about normalizing, confident that ultra-easy U.S. money would juice the global scene — and supports exports, a vital condition for expansion.