The U.S. Federal Reserve is likely to act soon to quell investor panic over the potential tapering of its bond-buying program, Fed watcher Jon Hilsenrath wrote in the Wall Street Journal late on Thursday.
Speculation over whether or not the Fed will pullback its $85 billion a month bond-buying program and the timing of that, has led to volatility in global markets, particularly within Asia. Japan's Nikkei, for example, has plunged near 20 percent from its five-and-a-half year high hit on May 23.
Are Markets Facing a Crisis of Confidence?
The Fed meets next Tuesday and Wednesday and according to the Wall Street Journal article, Fed Chairman Ben Bernanke will use the opportunity to reiterate that there will be a considerable period of time between the end of quantitative easing (QE) and raising short-term rates, a point he made in March.
"The chatter about pulling back the bond program has pushed up a wide range of interest rates and appears to have investors second-guessing the Fed's broader commitment to keeping rates low," wrote Hilsenrath.
"This is exactly what the Fed doesn't want. Officials see bond buying as added fuel they are providing to a limp economy. Once the economy is strong enough to live without the added fuel, they still expect to keep rates low to ensure the economy keeps moving forward," he added.