Another chorus of Fed speakers assured markets Friday the Fed was not going to rush to end easing, but they did not attempt to dissuade the market from the idea that reducing the bond buying program could occur later this year.
The latest to speak was San Francisco Fed President John Williams, a non voting member, who actually backed down from previous comments that, in his view, the Fed could taper easing as early as summer. In a speech Friday, he joined other Fed officials in emphasizing the Fed's actions would be dependent on economic data, and in an about face, he said it's too soon to say if it's time to slow bond buying. His remarks were prepared for delivery to the Sonoma County Economic Development Board.
A parade of Fed officials spoke with a common message—surprising because of the usual multitude of conflicting voices—since last week's meeting and comments from Chairman Ben Bernanke, detailing how the Fed could pull back on its quantitative easing program.
"It is rare for Fed officials to criticize or second guess market expectations for Fed policy, but today several FOMC officials did just that," wrote J.P. Morgan chief U.S. economist Michael Feroli.
Feroli also noted that Fed officials usually keep to a blackout period on speeches for a week after FOMC meetings. "First, Fed officials appear to be concerned about the state of the communication between the Fed and the markets. Second, this concern is most acute as it relates to expectations for the path of short-term interest rates. Third, while Fed officials appear to have concluded that the market may be coming to the wrong timing as it relates to the first rate hike, when it comes to asset purchases the concern is more qualitative. That is to say, Fed officials aren't fighting the view that tapering could come quite soon," he wrote.
Following last week's Fed meeting, markets went into convulsions, with the dollar rising, stocks falling and bond yields zipping higher, taking down emerging markets with them. But markets have cooled down, calming considerably since a parade of Fed officials began emphasizing that markets have overreacted and perhaps misinterpreted the Fed's intention. The most colorful was Dallas Fed President Richard Fisher, who pointed to the ability of some on Wall Street to act like 'feral hogs.'