Bloomberg headline: “Yellen says US economy must improve before Fed tapers QE”
That is a big-time stretch. What she says:
I believe the Federal Reserve has made significant progress toward its goals but has more work to do.
This is another key part:
Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve’s goal of 2 percent and is expected to continue to do so for some time.
For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.
That isn’t saying the economy must improve before the Fed tapers. ‘Ultimately’ probably means December isn’t in the cards but it’s not ‘print forever’. I don’t think these kneejerk reactions will last.
