Salient to Investors:

Richard Koo at Nomura Research Institute said:

  • The Fed should start tapering as soon as possible to prevent a premature rise in interest rates under tapering.
  • A December tapering would be beneficial for both Bernanke and Yellen. Bernanke began talking about tapering in May because he wanted to at least put things in motion before his term expired at the end of January, and avoid potential criticism that he had started QE but left the cleanup to his successor.
  • If Yellen’s strong dovish credentials were the basis for her nomination then it would be difficult for her to announce a tapering immediately after becoming Fed chair. Her job would be made much easier if Bernanke were able to set a new course for the Fed before stepping down.

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