According to the latest Fed meeting, the current 0% to .25% target range for the federal funds rate will likely be appropriate for a considerable time following the end of its asset purchase program in October.
The market expected the announcement of the end of quantitative easing Wednesday, putting an end to a more than two-year-old asset purchase program. Now the market is left to adjust for where the next step could potentially be.
It’s over. The Federal Open Market Committee officially decided to conclude its two-year-old asset purchase program this month due to the substantial improvement in the outlook for the labor market and strength in the broader economy. The Zero Interest Rate Policy, on the other hand, remains in full effect.
The Federal Open Market Committee meeting minutes are just minutes away from being revealed, potentially announcing the end to Quantitative Easing. Former Federal Reserve Chairman Alan Greenspan said he doesn’t think the Fed can unwind years of extraordinary stimulus without causing turmoil in financial markets.
When the Federal Reserve first announced the start of quantitative easing, the stock markets furiously reacted, becoming what is now referred to as the "taper tantrum." Fast forward more than half a year and where can this be seen in the market now?
"A range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow," the minutes continued.
Due to the clear progress the economy has made toward its long-term goals, the Philadelphia Fed president no longer believes the forward guidance language in the Fed statement is appropriate or warranted.
There is one distinct moment in recent memory when everything was going to be just fine. On an early morning, back in April 2013, the smallest of miracles happened on the economic front. This singular event would lead to calls that the developed world’s ability to do business, with all of its multitudinous complexities, was on the road to a recovery, maybe this time, finally, forever..
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