The Fed is trying to disconnect the idea of tapering asset purchases to rate hikes, according to WSJ Fedwatcher Jon Hilsenrath:
An adjustment in the program won’t mean that it will end all at once, officials say, and even more importantly it won’t mean that the Fed is anywhere near raising short-term interest rates.
Hilsenrath said Bernanke is likely to emphasize that tapering won’t mean rate hikes at his press conference following Wednesday’s FOMC decision.
I would take it a step further and argue that the market is pricing in more dovish comments from Bernanke. That’s why stocks are rising and the US dollar is slumping.
