It Looks Like A September Tapering Is A Done Deal

Since May, economists have been struggling to figure out when the Federal Reserve would begin to taper, or gradually reduce, its monthly purchases of $85 billion worth of bonds.

Various Fed members including Chairman Ben Bernanke have all emphasized the need to see improving economic data before the Fed would think about tapering.

Economists have generally speculated that the Fed's words and the economic data have pointed to a September taper.

However, Chicago Fed President Charles Evans, arguably the most dovish member of the Fed, may have given the word that acted effectively as the green light for a September taper.

From Societe Generale's Alvin Tan:

Looks like the September tapering start is a done deal. Even President Evans of the Chicago Fed, a noted dove, acknowledged "good improvement" in the labour market yesterday, and said that he "would clearly not rule" out a September tapering start. Evans however would like to see inflation near 2% before hiking rates, even if the unemployment rate fell below 6%. All three Fed speakers (Evans, Fisher & Lockhart) we have had since the FOMC last week have signalled the possibility of a September reduction on bond purchases.

Evans was the brains behind the Fed's implementation of inflation and unemployment rate thresholds used to guide monetary policy.

While Evans wasn't explicitly endorsing a Fed taper, given his historically dovish stance, his carefully chosen words yesterday have been interpreted broadly as hawkish.