Sep 16, 2013

Remember, the US Fed’s windback is not irreversible

With the first step in the Fed’s tightening process likely by the end of the week, markets can take comfort in the fact that policy will revert at the first sign of any shock.

Stephen Koukoulas

Economist, Per Capita research fellow and former Labor adviser

Ben Bernake

This week looks like it will mark the beginning of the end of the financial crisis as the US Federal Reserve meets to discuss the economy and monetary policy settings.

The Fed is likely to start the process of tightening monetary policy on Thursday morning, Australian time, as it takes the first baby step in the process of winding back the unprecedented stimulus that has been in place over recent years. That stimulus is in the form of near zero interest rates and an unprecedented level of money printing (purchasing bonds) which was designed to stabilise the banking sector, kick start economic and jobs growth and prevent deflation from taking hold.

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