Is the Fed in rush to cut Bonds-Buying?
If investors’ attention is directed to the ECB meeting this Thursday, it’s undoubtedly the Fed publication on Friday, November 7 which is in their minds.
Since the end of the Shut Down on October 16, changes in the Federal Reserve are under the news spot. The financial markets scrutinize the decisions and the results generated by the most powerful central bank. Next Friday, the Fed publication will set the landscape of the financial markets.
Everything will revolve around the Fed policy and the investors will be asking themselves: will the Federal Reserve continue to provide liquidity by buying for $85 billion securities obligations or not?
But first of all, the unemployment rate and the projected rates inflations will be discussed. Ben Bernanke current Fed chairman was clear, reaching 6.5% unemployment and 2% inflation would lead to a progressive injection stop, a sign of a good US economy health.
The same idea is taken this week by Members of the Federal Open Market Committee “FOMC” . According to the governor Jerome Powell, “timing is necessarily uncertain” everything depends on the economic growth and the Fed is not in hurry to cut buying bonds. Also, Eric Rosengreen, president of the Boston Reserve, believes that there are two “hypothetical” situations: the first one with the policy staying “unchanged until April 2014”, the second one with the buying reduced progressively “$75 billions in December, $50 billions in January, $25 billions in March and completed altogether by April” depending on the economic growth. Rosengreen also suggested that the interest rate remains lower after stopping purchases in April 2014, until the unemployment rates reaches 5.25%.
As the economic situation has not changed and the objectives set by Bernanke have not yet been achieved, purchases of securities by the Fed will not stop, thus calling into question the speculations about the cessation of liquidity injection in March 2014. Like the euro, the dollar will remain under selling pressure and this week will difficult and uncertain for the most traded currency in the world.
Posted by MBCFX