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30 Jul 2014
Tapering on schedule – Rabobank
FXStreet (Guatemala) - Analysts at Rabobank noted that, as expected, the FOMC decided to taper its asset purchase program by another $10bn, evenly split between US treasuries and agency MBS.
Key Quotes:
“This will reduce the purchases of treasuries in August to $15bn (from $20bn) and the purchases of agency MBS to $10bn (from $15bn). This will bring the total monthly amount of asset purchases down to $25bn, from $35bn”.
“Charles Plosser (Philly Fed) showed he is currently the most hawkish voting member of the Committee, voting against today’s decision, objecting to the guidance indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for ’’a considerable time after the asset purchase program ends,’’ because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee’s goals”.
“The Fed acknowledged the rebound in inflation and said that inflation is moving somewhat closer to target and that the likelihood of inflation running persistently below 2 percent has diminished somewhat”
“The FOMC changed its assessment of the labor market from ’the unemployment rate remains elevated’ to ‘there remains significant underutilization of labor’. This means that now that the unemployment rate (U3) has come down to 6.1%, the Committee is changing its focus to the underemployment rate (U6) which currently stands at 12.1%. This broader measure includes marginally attached workers (for example: discouraged workers) and people who want to work fulltime, but cannot because of economic reasons. This shift confirms our hypothesis that the Fed is ‘ticking all the boxes’ before it is going to embark on a hiking cycle”.
Key Quotes:
“This will reduce the purchases of treasuries in August to $15bn (from $20bn) and the purchases of agency MBS to $10bn (from $15bn). This will bring the total monthly amount of asset purchases down to $25bn, from $35bn”.
“Charles Plosser (Philly Fed) showed he is currently the most hawkish voting member of the Committee, voting against today’s decision, objecting to the guidance indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for ’’a considerable time after the asset purchase program ends,’’ because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee’s goals”.
“The Fed acknowledged the rebound in inflation and said that inflation is moving somewhat closer to target and that the likelihood of inflation running persistently below 2 percent has diminished somewhat”
“The FOMC changed its assessment of the labor market from ’the unemployment rate remains elevated’ to ‘there remains significant underutilization of labor’. This means that now that the unemployment rate (U3) has come down to 6.1%, the Committee is changing its focus to the underemployment rate (U6) which currently stands at 12.1%. This broader measure includes marginally attached workers (for example: discouraged workers) and people who want to work fulltime, but cannot because of economic reasons. This shift confirms our hypothesis that the Fed is ‘ticking all the boxes’ before it is going to embark on a hiking cycle”.