The Fed decision is characterized by some as taper or no taper and by others as a decision about how much to taper. If it were only that easy.
There are many moving parts and the WSJ has a good primer.
The overarching theme to keep in mind is mid-2014. That’s Bernanke’s stated timeline to end QE. Whether the Fed tapers $5B, $10B or $15B is less important that what it means for future tapering and that timeline.
If the Fed tapers only $5 billion and signals an aggressive taper in the months ahead, that’s hawkish good news for the dollar. If the Fed tapers $15 billion and says it’s done tapering for the year and may extend QE beyond mid-2014, that’s a bit dovish and bad for the dollar.
On top of that, factor in changes to forecasts and forward guidance and it will be an epic task to digest it and act in minutes tomorrow.
