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20 Jun 2013
Flash: FOMC creates waves – Investec
FXstreet.com (New York) - According to Lee McDarby, Corporate Treasury at Investec, “Last night was probably the most important economic event of the week as the Federal Reserve’s FOMC announced its interest rate decision followed by Ben Bernanke’s press conference.”
There were no surprises on the rate front as the Fed kept rates in the target 0-0.25% range and left the QE3 purchases at $85bbn per month. However, the accompanying statement was little changed from May, but one difference worth noting was that the FOMC now sees diminished downside risks to the economy and the labor market, compared with last autumn.
“The critical point was always going to be the press conference where the markets would be looking for clues to when the Fed might reduce its asset purchase program.” McDarby notes. In his statement, Ben Bernanke expressed the view that tapering would likely begin later this year with Quantitative Easing ending around mid 2014, after which would be an extended period before the first hike in rates. Although as was expected this is very much down to the economy, in that if the economy falters the timetable will be shifted back.
There were no surprises on the rate front as the Fed kept rates in the target 0-0.25% range and left the QE3 purchases at $85bbn per month. However, the accompanying statement was little changed from May, but one difference worth noting was that the FOMC now sees diminished downside risks to the economy and the labor market, compared with last autumn.
“The critical point was always going to be the press conference where the markets would be looking for clues to when the Fed might reduce its asset purchase program.” McDarby notes. In his statement, Ben Bernanke expressed the view that tapering would likely begin later this year with Quantitative Easing ending around mid 2014, after which would be an extended period before the first hike in rates. Although as was expected this is very much down to the economy, in that if the economy falters the timetable will be shifted back.