August 21 2013

According to the FOMC meeting minutes, “a few” officials were keen to make a move sooner and “a few” urged more caution. The minutes also revealed that some FOMC members were cautious about the still weak US recovery…

 


Powered by Guardian.co.ukThis article titled “Fed minutes show cautious move towards end of economic stimulus” was written by Dominic Rushe in New York, for The Guardian on Wednesday 21st August 2013 19.56 UTC

The Federal Reserve inched nearer to reining in its bn-a-month economic stimulus programme last month, according to the minutes of its last meeting which were released on Wednesday. But the central bank did not give any clear indication about when that scaling back might begin.

The minutes of the Federal Open Market Committee (FOMC) meeting which took place late last month offered a mixed view on committee members’ willingness to ease back on the so-called quantitative easing (QE) programme. According to the minutes, “a few” officials were keen to make a move sooner and “a few” urged more caution. The minutes also revealed that some FOMC members were cautious about the still weak US recovery. US stock markets were largely unchanged after the news was released.

Most FOMC members felt that growth in the economy would pick up in the second half of the year and further strengthen in 2014. According to the minutes: “A number of participants indicated, however, that they were somewhat less confident about a near-term pickup in economic growth than they had been in June.” The minutes described recent economic data as “mixed”.

The Federal Reserve chairman, Ben Bernanke, indicated in June that the stimulus programme could be scaled back later this year, if economic data continued to be positive. The news sparked a sell off in the equity markets but despite some volatility they have remained close to record highs.

The QE programme, the Fed’s third round of bond buying, is intended to keep rates low and encourage investment in the economy in the hopes of driving jobs growth. Bernanke has given no clear indication when any tapering in the massive bond-buying programme could begin; economists have speculated that it could come as soon as September or be delayed until next year.

The summary of the 30-31 July meeting said that while “a few [committee] members emphasized the importance of being patient and evaluating additional information before deciding on any changes to the pace of asset purchases”, a few others “suggested that it might soon be time to slow somewhat the pace of purchases”.

The signals from the US economy are broadly positive but there are still many concerns. Unemployment rates continue to inch down but remain relatively high. The Fed minutes said: “Private-sector employment increased further in June, but the unemployment rate was still elevated.” The US housing market appears to be on the mend but some have worried that a recent rise in interest rates could have an impact. “While recent mortgage rate increases might serve to restrain housing activity, several participants expressed confidence that the housing recovery would be resilient in the face of the higher rates,” the minutes said.

Bernanke is widely expected to announce his decision to resign as Fed chair. His third term comes to an end at the end of January 2014 and President Barack Obama has said that he will appoint a successor this autumn. Bernanke will hold a press conference after the FOMC’s next meeting, in mid-September.

The two most likely candidates to take over Bernanke’s job at present are the Fed vice-chair Janet Yellen and Larry Summers, a former Treasury secretary who is one of Obama’s closest economic advisers.

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.


USA 

In the trading room today: EUR and USD Analysis and Outlook. As the relative calm and stronger economic data from the euro-zone continues to fuel the EUR rally throughout the month of August, we explore the outlook for the single currency against the U.S. dollar and other currency majors, we analyze the bullish breakout in the EUR/USD currency pair, we note the GBP/USD pair’s test of a resistance area, we keep an eye on the USD/JPY pair, we highlight the market’s reaction to the U.K. Public Sector Borrowing and CBI Industrial Orders, we discuss new forecasts from Citigroup and UBS, and prepare for the trading session ahead.