"Within the next several
months, the Fed is likely to announce the tapering of QE. That's not a big
surprise, but this time there is an interesting twist: in order to offset the
risk that tapering might cause interest rates to move higher—which could slow
the still-weak housing market and the still-weak economy—the Fed will also
announce a lowering of the unemployment rate threshold that would prompt them
to begin raising interest rates. By doing this the Fed would be removing some
of the unwinding risk that continued tapering creates, while at the same time
keeping bond yields from increasing, since a lower unemployment rate threshold
would significantly extend the period during which the Fed would keep
short-term interest at or near zero."
