On May 22, 2013, then Federal Reserve chief Ben Bernanke said that over the coming months the bank could “take a step down in our pace of (asset) purchases.” Those remarks set off a months-long selling storm – the taper tantrum.
Eight years on, are markets in for another tantrum?
There was taste of it in a panicky reaction to Treasury Secretary Janet Yellen’s comment, quickly walked back, that rates would have to rise someday. Still, a strong economy suggests the Fed will have to soon start hinting at unwinding asset-buying stimulus; tapering could even start by end-2022.
Recent data, including the blowout April inflation print, has sown fear that rates may rise sooner than expected. One worrying change since 2013 is the $70 trillion-plus rise in global debt. If wobbly markets fail to get reassurance from Fed speakers in the coming days, a mini-tantrum could follow.