The minutes of the most recent Federal Reserve Open Market meeting have been released. The notes show that there is strong support for beginning to taper the quantitative easing program currently underway at the central bank. The move confirms what most investors seem to have been projecting for some time, that the Fed is about to begin easing off of quantitative easing.


However, the minutes offered few clues about when a reduction in the size of the program might take place. That leaves investors in a quandary as they try to figure out the best time to trade based on the development. Some traders are obviously acting early. Bond prices are up significantly overall while the equities market has slowed done, particularly in emerging markets.

Not yet appropriate

Despite the general feeling that an easing off of the program was coming, most of those on the Federal Reserve board think that right now, or at least when the meeting took place, is too soon to announce the move. Federal Reserve board members, and investors, are nervous that a slowing of the program will have a dampening effect on the economy’s unsteady growth.

That means the Federal Reserve is still unsure if tapering will help or harm the economy. When they do eventually taper the program, they’ll have given the market a long time to adjust.

QE3 next time around

The Fed will soon hold its open market meeting for the month in August, and looking at the markets a large swathe of investors think this time around will see a move toward tapering the program. In past statements, Federal Reserve Chairman Ben Bernanke said that even if QE3 is slowed, it does not mean an end to the program. The central bank retains the right to dial it up again if the economy suffers.

Timing is important for both the Federal Reserve and investors. If traders fail to anticipate a move toward reducing the size of the program, they’ll move out as equities slump on the movement of more money into the bond market. The Federal Reserve needs to be sure that making its move will be an overall positive for the economy.

Whether that comes this month or some time in the next sixth is difficult to predict, and these minutes offer nothing in the way of evidence. The results of the next meeting will be closely followed, if there is a change in policy there will be a big change in markets.