Markets: Beyond tapering

Worries about the market reaction to US Federal Reserve’s tapering plans may be overdone.

Explicitly, quantitative easing has nothing to do with the equity market. It is expected the liquidity tap will be turned down, but the fear it will send equity markets plummeting is really not a plausible aftermath.

The purpose of quantitative easing was to reduce borrowing rates for financial institutions below the official federal funds rate, which had already been slashed to 0.25 percent. On this front, quantitative easing has been successful.


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