Salient to Investors:

Stephen Stanley at Pierpont Securities sees nothing on the economy side to have precipitated such a seismic shift in the Fed’s approach to QE. Stanley said QE was contributing to a market environment where people were taking too much risk, and the beginning of tapering in September is a lot more predetermined than the Fed is letting on.

Michael Gapen at Barclays says making the unemployment rate the dominant factor in determining the course of monetary policy has made it easier for officials to make the case for taking the foot off the accelerator, so near-term there will probably be less volatility on any data point that is not related to unemployment. Gapen expects tapering to begin in September and end by March 2014.

James Bianco at Bianco Research said if the Fed were truly data dependent, it should have been talking about increasing or extending QE, not about getting out. Bianco said it is no longer just about the economy, it’s also about the markets, and QE is distorting markets – when you distort markets, things end badly.

Alan Blinder at Princeton said there is some sentiment on the FOMC that a primary consideration should be that investors are taking on excessive risk in search of yield, though how much of that sentiment in Bernanke himself is unknown.

Michael Woodford at Columbia University says it is also important to tell investors that as the Fed balance sheet gets bigger, the bar to justify additional purchases rises.

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