US Federal Reserve should take the global economy into consideration when implementing its retreat from QE

Recently the US Federal Reserve stated its intention to draw its quantitative easing policy to an end. Although the Fed's officials, including Ben Bernanke himself, have repeatedly stressed that the final decision on when has not been made, based on the United States' economic situation and the conditions given by Bernanke for quitting quantitative easing, it is highly probable it will take place within the year.

The economic indicators have been favorable for quitting, as inflation fell below 2 percent and the unemployment rate is falling. Since April of last year, the US' annual inflation rate has remained low at between 1.3 and 1.9 percent. Since last December, the unemployment rate has declined to 7.6 percent, and although it has not yet dropped to 7 percent, there are reasons to expect the Fed will not wait for that to happen. As long as the unemployment rate declines steadily for three consecutive months, monetary policy adjustments will occur. Of course, other factors, such as second and third quarter GDP growth, the fiscal situation, market response, and even pressure from US President Barack Obama will influence the Fed's final decision.