President Barack Obama clearly signaled this week that Federal Reserve chairman Ben S. Bernanke will be leaving the central bank when his term ends in January and that looming departure means Bernanke will want to begin tapering asset purchases this year, said Harvard University economics professor Martin Feldstein.

The Fed has been making $85 billion in monthly bond purchases in an effort to spur job growth and galvanize faster U.S. economic expansion. The policy making Federal Open Market Committee is meeting today in Washington, with four more FOMC meetings scheduled before the end of the year.

"One of the implications of the fact that Ben is now very, very likely to be leaving at the beginning of the year is that he's going to want to get the so-called exit strategy under way," Feldstein said on CNBC television today. "He's going to want to start the tapering before he leaves so that he can say, 'I did all these good things, and I put us on an exit path.'"

Obama said Bernanke has "already stayed a lot longer than he wanted or he was supposed to" in an interview with Charlie Rose that was broadcast June 17 on PBS.

"The president more or less said the other day, on television, 'Your time is up, Mr. Bernanke,'" Feldstein said. "I didn't think that was a very nice gesture on the president's part."

David Fuller's view Ben Bernanke was appointed Chairman of the US Federal Reserve because he was the academic expert who said he could prevent a destructive deflation, such as Japan experienced and which so many people feared. He succeeded in avoiding deflation with an exceptionally accommodative monetary policy, as we know, and this has cushioned downside risk for the US economy somewhat.

We also hear that Mr Bernanke will most likely be handing over leadership of the Fed to a successor appointed by President Obama, possibly before the expiry of his second term on 31 January 2014. It had been assumed that Fed Vice Chairman Janet Yellen would succeed Mr Bernanke, but President Obama has yet to confirm this.

There has been speculation about President Obama's terse comments regarding Mr Bernanke in his recent interview with Charlie Rose of CNBC. I will not add to the conjecture but weaning the economy off $85bn a month without disruption will be more challenging than providing the stimulus which has been a powerful tailwind for the stock market.

Here are two related articles, released just after the Fed's meeting today: Fed Keeps $85 Billion Pace of Bond Buying, Sees Risks Waning, and Fed Sees U.S. Jobless Rate as Low as 6.5% Threshold by End-2014.


Meanwhile, US long-dated interest rates have risen sharply in recent weeks (weekly & daily). Moreover, the Freddie Mac National Mortgage 30Yr Rate (weekly & daily) has surged since the beginning of May. This is updated weekly, on Thursdays, and is very likely to be higher tomorrow, given the action in Treasuries.

Long-dated government bonds in other countries are also rising - see Eoin's comments and charts below.