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Fed's Williams Gets Markets Moving in Final Hour

Thursday, 16 May 2013 | 4:23 PM ET

Stocks weakened shortly after 3 PM ET as the President of the San Francisco Fed, John Williams, said the Fed could begin easing up on bond purchases later this year.

So? Is this a surprise. It's important because Williams is a dove, which is why his comments are generating interest. Remember: there is a substantial community that believes the Fed is going to taper their purchases in September....and have positioned their portfolios accordingly. Traders with this view are seizing on anything that support their position. Talking your book, anyone?

But hold on. For one, Williams is not a voting member of the FOMC.

Second, Williams made it clear that the barrier for reducing purchases was a high one: "It will take further gains to convince me that the 'substantial improvement' test for ending our asset purchases has been met," he said.

Substantial improvement? Though Williams says the economic outlook is "clearly improving," you'd be hard pressed to see it this week. The economic data is going in the other direction! From May Empire and Philly Manufacturing, to April Industrial Production and Capacity Utilization, to today's April Housing Starts and higher Initial Jobless Claims, the data has been terrible this week!

Here are other headlines from his comments:

JOB MARKET STILL HASN'T MENDED ENOUGH TO END BOND BUYS

EVEN IF TAPERED, BOND BUYING COULD BE BOOSTED IF NEEDED

Get it? He's repeating what Bernanke said...if things get worse, they will ramp up, not down.


By CNBC's Bob Pisani

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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