'Fed Speak' Critical This Week Following QE Tapering Announcement

With markets continuing to price in last week's news from the Fed that a tapering of QE is expected later this year with a halt to the bond buying program expected by mid-2014, traders should take note that this week is littered with 'Fed Speak'. Specifically, 10 Federal Reserve Governors and Federal Reserve Bank presidents will be making comments this week.

Compass Point Research's Isaac Boltansky highlighted some specific events to keep an eye on.

On Wednesday at 10:00am the House Financial Services Committee will hold a hearing titled: "Examining How the Dodd-Frank Act Could Result in More Taxpayer-Funded Bailouts." The Committee will hear from Tom Hoenig (FDIC Vice Chair), Sheila Bair (Former FDIC Chair), Jeff Lacker (Richmond Fed President), Richard Fisher (Dallas Fed President). According to Boltansky, "We note that all four witnesses have publicly expressed their contempt for TBTF institutions. While the hearing should produce a unified message – that TBTF institutions distort economic functioning – we do not see a path to passage for any legislative effort aimed at shrinking the natio's largest financial institutions. Instead, we believe that political exhibits such as this hearing fortify regulators as they finalize rulemaking such as the Basel III capital rules."

The newest members of the Federal Reserve Board of Governors, Jeremy
Stein (Dove, FOMC voter) and Jerome Powell (Centrist, FOMC voter), will speak this week. Boltansky notes, "Neither Stein nor Powell have been outspoken since joining the FOMC in 2012. These two gentlemen are representative of the ideological center within the Fed Governor ranks and warrant additional attention given that they are voters every year of their term (unlike Fed Bank presidents who alternate as voters)."

In the week ahead, Boltansky said look for comments from three 2014 FOMC voters: (1) Narayana Kocherlakota (Minneapolis; Centrist); (2) Richard Fisher (Dallas, Hawk); and (3) Sandra Pianalto (Cleveland, Dove). "Given that the 2014 FOMC will likely be managing the Fed’s tapering/exit from QE3, we believe that the comments of these three individuals require heightened scrutiny (especially given that they represent the expanse of the ideological spectrum)," he said.

Below is a chart from Compass Point of upcoming Fed Speak this week:

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