Effects of the 2013 ‘Taper Tantrum’ Linger Over Fed Policy

At the Fed’s June meeting, Mr. Powell as well as his allies pressed Mr. Bernanke to reinforce the message.

“the idea will be very important to leave the markets feeling much more certain about the Committee’s intentions,” Mr. Powell said, according to the transcripts. “the idea’s important which the Committee, by which I definitely mean the Chairman, assert strong leadership to the markets on This kind of issue at This kind of time.”

Mr. Powell acknowledged which the Fed was facing a challenge in explaining its plans. Economic growth had repeatedly fallen short of the Fed’s expectations as well as millions of Americans remained out of work. Mr. Bernanke would certainly need to explain why the Fed thought the economy needed less help.

yet he expressed confidence in Mr. Bernanke. “Much rests on the shoulders of the Great Communicator,” he said, referring to the chairman. Then he compared Mr. Bernanke to LeBron James.

Mr. Bernanke flubbed his lines at the post-meeting news conference, leaving investors confused about the Fed’s intentions. Asset prices reacted as if the Fed was significantly reducing its stimulus plans. The yield on the benchmark 10-year Treasury rose by more than a percentage point over the summer.

The Fed finally announced the idea would certainly begin to taper its bond purchases in December 2013.

The market’s reaction convinced Fed officials, including Mr. Powell, which the Fed should handle its balance sheet differently via its benchmark interest rate. When the Fed began to reduce its bond holdings in 2017, the idea published a detailed timetable for those reductions, as well as the idea has stayed on schedule.

The taper tantrum, Mr. Powell said in Atlanta, is actually “one of the reasons why the balance sheet is actually supposed to be from the background, gradual as well as predictable, paint drying, as opposed to an active tool.”

yet investors increasingly are divided on the wisdom of which approach. Some see little evidence the Fed’s plodding approach is actually disrupting financial markets. Others say the Fed, despite moving slowly as well as predictably, is actually still producing waves.