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Fed officials have been all over the map on ending QE

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It became clear this week that investors are having trouble figuring out when the Fed’s multibillion-dollar stimulus program will end. But they’re not the only ones.

Officially, the Fed has said only that it will begin to wind down the program once there is “substantial improvement” in the labor market. But over the past year, several top Fed officials have floated suggestions for what that really means that have since fallen by the wayside. So, how are we looking on those various measures, and what does that signal for whether the Fed will begin its long-awaited taper at its October meeting, in Decemberor not until 2014?

These  are the different measures they have suggested for when the time will come for winding down QE. And their range of answers show why the path to the taper has been so confusing for so many investors.

Boston Fed President Eric Rosengren

The bar: 7.25 percent unemployment rate

What  he said: “We should continue to forcefully pursue asset purchases at least until the national unemployment rate falls below 7.25 percent and then assess the situation … achieving an unemployment rate of 7.25 percent would require real GDP growth of roughly 3 percent for a year. That would be growth that is a full percentage point faster than the economy’s so-called potential rate of growth, making this a challenge to achieve.” – November 2012

What happened: The unemployment rate fell to 7.3 percent in August – but for all the wrong reasons. Workers are dropping out of the labor force at a surprising clip, bringing down the jobless rate even though hiring remains anemic.

There’s always a caveat: “Suppose we reach one’s threshold unemployment rate but at that time the economy is slowing, and no further improvement in the unemployment rate is expected in the short to medium term. This hypothetical situation would not necessarily imply a change in policy stance, especially if inflation was projected to remain below target.”

Chicago Fed President Charles Evans

The bar: 200,000 jobs a month for six months

What he said: “"I think that would be a good marker -- it's a threshold, it's an indication … In combination with (GDP) growth above trend, that would really reinforce and solidify the idea that we are getting substantial improvement." -- September 2012

What happened: That bar seems impossibly high now, with job growth hitting that goal just once over the past six months.

My bad: Evans has since walked back his statement.  “I have to admit I've sort of rethought that a little bit," he said, according to wire reports. "We've marked our forecasts to reality."

San Francisco Fed President John Williams

The bar: This summer

What he said: “Assuming my economic forecast holds true, I expect we will meet the test for substantial improvement in the outlook for the labor market by this summer. If that happens, we could start tapering our purchases then. If all goes as hoped, we could end the purchase program sometime late this year.” – April 2013

What happened: Hiring slowed down over the summer, while economic growth disappointed.

There’s always a caveat: “But it will take more solid evidence to convince me that it’s time to trim our asset purchases.  An important rule in both forecasting and policymaking is not to overreact to what may turn out to be just a blip in the data.”

Ben “The Beard" Bernanke

The bar: 7 percent unemployment, mid-2014 for ending the stimulus

What he said: “If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year. And if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear. In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7 percent, with solid economic growth supporting further job gains, a substantial improvement from the 8.1 percent unemployment rate that prevailed when the Committee announced this program.” – June 2013

What happened: That pesky shrinking workforce again, as well as tepid economic growth and hiring. Seven percent seems to be out the window, but the end-date of mid-2014 could still be in play.

There’s always a caveat:I would like to emphasize once more the point that our policy is in no way predetermined and will depend on the incoming data and the evolution of the outlook as well as on the cumulative progress toward our objectives.”