Fed Speak Has Some Expecting QE End in December

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Ben Bernanke

Investors have welcomed the latest dovish comments from the chairman of the U.S. Federal Reserve, but one nuance of the minutes of the central bank's last meeting has got some analysts wondering whether the tapering of U.S. monetary policy will culminate in an end to asset purchases by December.

"There is a hint in the minutes that the tapering might be a short-lived process," Robert Mellman, senior U.S. economist for JPMorgan said in a research note on Wednesday evening.

The Fed released minutes from its June meeting last week when Bernanke outlined a roadmap on how the bank's $85 billion a month asset purchases could be wound down later this year. On page nine, in the Fed's economic projections it hinted that a sizable portion of Fed members would like to see quantitative easing (QE) end, not slow, before the year is out.

(Read More: Fed Easing of Stimulus Could Hamper European Recovery)

"Given their respective economic outlooks, all participants but one judged that it would be appropriate to continue purchasing both agency MBS (mortgage backed securities) and longer-term Treasury securities. About half of these participants indicated that it likely would be appropriate to end asset purchases late this year."

The wording has economists at Nomura equally puzzled. Some of the details in the minutes do not match some of the comments made by Chairman Bernanke in his post-meeting press conference, the bank said in a research note.

"The Summary of Economic Projections noted that 'about half' of FOMC (Federal Open Market Committee) participants expected asset purchases to end by the end of this year, which is at odds with the Bernanke's statement that a 'consensus' of the committee was that asset purchases would likely extend into the middle of 2014," Nomura economist led by Lewis Alexander said in a research note on Thursday.

(Read More: What Did Ben Say? Playing the Fed Word Game)

"In addition, there was no mention in the minutes of the final termination of the asset purchase program being associated with an unemployment rate of 7 percent, as the chairman discussed in his last press conference."

Despite the confusion the market consensus, even after Bernanke's speech is that September will be the month when bond purchases will be first moderated by the Fed. The labor market numbers would have to weaken markedly to prevent a September tapering, according to a morning note by Ian Shepherdson, chief economist at Pantheon Macroeconomics.

But analysts can be forgiven for confusion over the Fed's statements. At its June meeting Bernanke said that even if a modest reduction in the pace of asset purchases occurs, it would not be shrinking the Federal Reserve's portfolio of securities, but only slowing the pace.

(Read More: Global Markets Sigh in Relief on Bernanke Comments)

"To use the analogy of driving an automobile, any slowing in the pace of purchases will be akin to letting up a bit on the gas pedal as the car picks up speed, not to beginning to apply the brakes," Bernanke said on June 19.

Would taking your foot off the gas in September and the car stopping in December constitute nice parking, or a screeching halt? Global stocks markets appear not to be overly concerned; key European indexes jumped over 1 percent on the open on Thursday and Asian stocks enjoyed a relief rally.

—By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81.

Correction: An earlier version of this article incorrectly said that Federal Reserve Chairman Ben Bernanke spoke on July 19, when in fact he spoke on June 19.