Fed officials in damage control mode
POSTED: Friday, June 28, 2013 - 9:00am
UPDATED: Friday, June 28, 2013 - 9:04am
Annalyn Kurtz NEW YORK (CNNMoney) — Federal Reserve officials are still in damage control mode Friday, after comments about winding down stimulus frazzled markets last week.
Jeremy Stein, a Federal Reserve Board Governor based in Washington, noted Friday that investors may have overreacted, after Fed Chairman Ben Bernanke said the central bank may start slowing its stimulus program later this year.
Initially, stocks fell and bond yields rose, after Bernanke's press conference last Wednesday.
Since then, the 30-year mortgage rate spiked from 3.9% to nearly 4.5%, it's biggest one-week gain in 26 years.
But Stein urged the public not to read too much into the volatility.
"Consumers and businesses who look to asset prices for clues about the future stance of monetary policy should take care not to over-interpret these movements," he said in prepared remarks. "We have attempted in recent weeks to provide more clarity about the nature of our policy reaction function, but I view the fundamentals of our underlying policy stance as broadly unchanged."
The comments echo similar speeches this week by five other Fed officials, who have all said that the Fed's controversial stimulus program could continue at full blast if economic growth doesn't live up to their expectations.
Ultimately, the policy depends on the economic data, not a calendar date, they've said.
The current stimulus program marks the third round of so-called quantitative easing, or QE3 for short, and entails buying $85 billion in Treasuries and mortgage-backed securities each month.
The question is when will the Fed start to reduce the pace of those purchases each month, and when will it end the program completely?
Last week, Bernanke said the Fed is considering tapering the program "later this year" and could bring it to an end in mid-2014, should the unemployment rate fall to roughly 7% over that time frame.
In his remarks Friday, Stein laid out September as a hypothetical time frame for "tapering" the program.
Two more Fed speeches are scheduled later Friday, including remarks by Richmond Fed President Jeffrey Lacker, who has largely been a critic of QE3, and San Francisco Fed President John Williams.