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Hatzius: Baseline for Taper is March, 2014

Jan Hatzius was on CNBC this morning discussing the endless debate about the start of the “taper”.  Hatzius says the most likely announcement of the taper is the March meeting.   He also says the Fed is likely to combine the announcement with a change in forward guidance.

I think that’s pretty good for now.  I don’t think there’s any chance the taper begins before Yellen takes control of the Fed.  I just don’t think Bernanke wants to create any disruption by initiating QE during the transition in leadership.  It’s much cleaner to do so after Yellen is in the leadership position.  Additionally, I think the economy is still weak enough for the Fed to justify continued QE.  All of this makes March a reasonable date, but I think we’ll have to revisit this early next year because Yellen has already made it clear that she’s a bit more dovish than Ben Bernanke and I suspect that 7.3% unemployment has her very concerned about the economy here.

Hatzius also discussed his outlook in 2014.  He’s fairly optimistic on the economy.  See here for the video.

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