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U.S. Fed May Cancel QE Program In Near Future
Written by: PaxForex analytics dept - Friday, 23 May 2014 0 comments
The leaders of the U.S. Federal Reserve made a decision that is likely to begin in the near future to cancel the assistance program QE. This is evidenced by October meeting’s reports (minutes) published on Wednesday by the main body of the U.S. central bank - FOMC.
According to the documents, this option will be considered if the situation on the labor market in the U.S. will continue to improve. Also, FOMC considers the probability of making such steps even in the absence of obvious signs of labor market’s recovery. However, as stated in the minutes, Fed officials expect that in the near future the situation will get better. This does not exclude that after the ending of the QE program may be increased an interbank rate, which is at a record low of 0 to 0.25% since December 2008. Currently, the Fed acquires monthly securities backed by mortgage loans, amounting to $ 40 billion, as well as long-term U.S. Treasury securities in the amount of $ 45 billion. It is believed that these measures will help to restore the American economy. It
is also interesting that such a decision can be taken even in the absence of obvious signs of recovery, before the labor market forecasts will point to an unambiguous improvement, according to the report.
Several committee members suggested raising the threshold target of unemployment to 6.5%, after which it is planned to reduce QE incentives. In October, unemployment was at 7.3% level. The next step would be to increase the interest rate. The decision to start ending the program of quantitative easing may be taken at the next meeting of the Fed, which is scheduled for December 17-18, said on Wednesday James Bullard , the head of the Federal Reserve Bank of St. Louis. He expects that November stats on the U.S. labor market will contribute to the final decision on QE program.
This news led to a decline in U.S. stock indices, but lightly - by 0.3-0.4%. Investors are waiting for a certainty from the U.S. Federal Reserve new head Janet Yellen. Ms. Yellen has already indicated that she would not make any sudden movements to reduce the economic stimulus program.