The quantitative easing and the Federal Reserve’s tapering of the bond buying program has gained a momentum in the past months and now the date has come for the FOMC meeting on September 17-18, Tuesday and Wednesday. The investors as well as the Asian economies are looking forward for the FOMC’s decision.

So, what is quantitative easing? As per the definition, quantitative easing refers to the Federal Reserve’s program of buying bonds from the member banks by buying US Treasury notes and mortgage backed securities (MBS). The Fed issues credit to the bank’s reserves to buy the bond. The objective of QE is to increase the money supply in the economy to increase the liquidity in the financial market. This lowers down the interest rates making available for the people to borrow and invest. This as a whole boost the consumption level, increased demand, employment increase and as whole economy advances.

The QE1 started after the global financial crisis on November 25, 2008 when the Fed announced to purchase US $ 800 billion in bank debt, treasury notes and MBS and lasted till June 2010. Similarly, on November 3, 2010 Fed announced to make an additional purchase of US $600 billion of treasury securities known as QE2. This ended on June 2011. In addition, to QE Operation Twist was incorporated to solve the housing market downfall by buying further MBS and long-term notes. The QE3 started with the buy of US $40 billion in MBS and continuing operation twist from September 13, 2012, adding US $ 85 billion liquidity a month. The QE4 started on January 2013 to buy a US $ 85 billion in long term treasuries and MBS.

 The present improving US economic condition with increased GDP to 2.5% in the second quarter and US inflation eased in July with annual inflation rate of 2%. Similarly, the unemployment rate has decreased since May from 7.6% to 7.3% in August. These circumstances makes move for Fed to taper its QE program.

Ben S. Bernake’s term as Central Bank chairman is likely to expire on Jan 31whereas Fed Vice Chairman Janet Yellen is the potential candidate for next Fed Chairman as the next Chairman candidacy Lawrence Summers has withdrawn himself from consideration as the next Fed’s chairman. This dropped the US Dollar and enhanced the gold and silver prices. The Septaper is even likely to show its effects from its minutes report. The trend shows the gold and other precious metals would fall as Fed moves as expected which could prove the catalyst to push gold prices lower. But still, investors and speculators are on a wait and watch situation.