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Fed’s tapering requires preparation for interest rate rise and bubble collapse : The DONG-A ILBO

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The Federal Reserve (Fed), the central bank of the U.S., said tapering, which reduces liquidity provided in the market by buying bonds, etc., will begin in November. As tapering naturally leads to an interest rate rise, it means the zero-rate period will end soon in the country. It is bound to affect future actions by the Bank of Korea, which preemptively raised the base rate in August.

“Slowing the pace of asset purchases may soon be justified if progress (in inflation and employment) continues largely as expected,” the Fed said in a statement announced on Wednesday. Fed Chair Jerome Powell also said that tapering “could come as soon as the next meeting.” If tapering is decided at a meeting of the Federal Open Market Committee (FOMC) in early November and is carried out into the next year, an interest rate hike can begin in the second half of next year. Tapering is not necessarily negative as it signals that the U.S. economy is recovering from…

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