Fed May End Stimulus Program:
The current news that released from the minutes of central banks last meeting on Thursday claims that Federal Reserve may end its stimulus program before the end of 2013.
On December 12, the members of central bank said that they want to put an end to quantitative easing program before the New Year arrives. It is quite a surprising move from these members, as this policy was said to be continued for at least four years. Some members also had opinions that they should have stopped this bond buying program much before.
As this drastic change on policy can have a great impact on the stock markets, most of the analysts are hoping that central bank is not going to make such a major policy shift now. But there can be slight changes for sure as most of the members of the committee are now against this policy or in support of putting an end to it.
Already the impacts of such opinions of members are being felt in the stock markets. After 2 pm on Thursday, when the minutes were released, the stock rates were in slightly declining move. The 10 year yield had the highest records of rising since May 10, as it grew to 1.91% on present date.
The traders are feeling anxious about this early & sudden end of stimulus program and they think that there can be threats of interest rates of loans to go higher with such decisions.
Bill Gross, Co-chief investment officer of PIMCO, in his opinion to CNBC said, "It's not a sea change, But it's a little bit of a surprise. The minutes basically say a few wanted QE to end about the end of 2013 and several wanted it well before. That means four or five members are in the opposing camp."
This new and unprecedented move has shocked the financial experts as Fed committee previously made this bond buying policy looking to the drastic increase in unemployment rates in USA. They also had claimed that they will continue this stimulus program until the unemployment rate falls at least to 6.5%.
On the other hand, James Bullard, the president St. Louis Federal Reserve on his review on this current policy move of fed, told CNBC on Friday that, the Federal Reserve is just keeping a pause on their stimulus program. There is no point of binding this policy shift in to dates.
The Fed can anytime remove the pause, if it sees any improvement in the country’s balance sheet policy. If there is improvement in the economy by the end of 2013, the fed is going to reassess its position to make changes in the stimulus program. On the other hand, if there is no improvement in the current economic situation, then such pause can continue till the end of 2014.
He also said that he is hoping that with recent add-ons in the labor market, the unemployment rate can reduce down by the end of the year, 2013. Such improvement can also work as a factor for Fed to change its new decision on pausing stimulus program.
Post A Comment: