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-- markets now on the Fed's 85 billion dollar month bond buying program has been helping out the stock market recently but -- the economy improves here there will come a time.
One of these to slow down eventually when it -- just stopped.
Altogether so with us from DC this morning is John helped -- the chief economics correspondent for the Wall Street Journal and from Memphis Tennessee Kevin -- joins us had a fixed incumbent.
Raymond James Kevin hang on a second we'll get you in a moment ought to start -- Johns reporting which is set the tone for all of this is peace.
On the Fed mapping its exit from stimulus being widely read.
By market operatives -- so tell us that map what's the plan John inside the Federal Reserve.
Aside I think the thing to think about is it when the Fed.
Turned off its QE programs before it used an on off switch.
They just kind of stopped doing it basically what they're talking about doing now is using a dimmer.
That's slowly dialing it down as their own confidence in the economy.
And that's the message that they've been trying to get -- frankly they've been struggling to do it for the last couple months they've put these really cryptic.
Into their formal policy statements that.
The market has a very hard time reading and what I tried to do with this story this weekend.
Connect the dots and put it together and explain how this dimmer -- is gonna work to people.
Okay so do that here -- you -- to the best of your ability -- -- started -- that's good it's a good analogy to Denver so when they start hitting it and then what -- how does the timing work out to the best of your knowledge inside the Fed.
Well -- -- that the way in question is the 85 billion dollar question if they had and then the honest answer is we don't know when they don't now what they need to do this every time the data every.
It's every data point that we get that stronger depth increases the probability that that start plane is gonna come forward we had good retail sales numbers today.
The probability went up OK so that better than expected retail -- there.
Probability goes up -- they start hitting the dimmer and then how aggressive that depends on how strong economy is another -- well you know I was so excited I think that that.
There are -- a little reluctant to move to aggressively because -- turn this stuff off in the past.
And they ended up feeling like they turn it off too quickly because they were turn -- off in the economy.
Kind of would slow down and I'd do anything for a little while so they want to be really tentative about this and what it is for people in the market is.
Uncertainty the Fed might turn dialed down a little bit.
And then we're not gonna know what comes next -- the economy slows down they could turn it back up again.
Obviously Kevin Davis thanks to this the Johnson.
They gotta go do on the Fed to citizens feel the Wall Street Journal -- -- -- the inside scoop on what their thinking from what you heard him describe and what you read in the paper.
-- -- the market would react to this type -- scenario.
Well I think of her personal John's articles and terrific quarter and it ended is going to be the story over the next year and a half I think the issue -- At this time is the market tends to think in very small.
Data points vs what the Fed may do over a longer period of time.
Right now we're sitting on the fact that the Fed will continue to provide stimulus in the marketplace.
For as long as it doesn't work or is it as well as it works too much so I think there's there's two kind of wide points there in between -- is what they've already said -- that is.
Unemployment needs to reach around six and a half percent before they stop stimulus.
We're currently around seven and a half percent how long does it take is to close the gap to one now that 1% gap and unemployment.
In the meantime.
Yeah -- talk about 2% growth so I'm not sure that a month ago we were talking about more stimulus and now we're talking my opponent back it's kind of premature the fact that Richard -- leave it isn't surprising.
That this idea -- have.
This -- -- -- John make another point but I just I I think that's a really important point is that you know they might turn is -- down.
And in the next few months but the fact of the matter is we're talking about a flood of money that's gonna be continuing to come into the -- into the financial system.
For a really long timing and let's not forget short term interest rates to near zero.
The Fed has made very clear doesn't expect to start raising those interest rates -- -- 4015.
You know and then before we even start talking about them selling these bonds that's far out in the future I mean we're talking about a very very easy money fed for a lot of.
As a final point candidates -- that idea that it won't be cold Turkey that'll be over time is not easier for the markets -- absorb just you know theoretically at least.
No actually is I think I think though the Fed does not want to disrupt the markets by -- by just hitting the brakes -- once I think it's.
I think it's.
You know part of their strategy to kind of -- information get out in over time.
Tom as the economy improves and that's the key here is that we gotta get above 2% growth we got to see inflation.
Before we're gonna see the Fed stop doing this.
But as that happens at the marketplace.
They receive that information well and adjusts rather than gap enough to yield curve starts having get a sense that Raymond James and also of course John l.'s draft from Wall Street Journal thanks to both -- --
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