22 Aug 2013
Flash: FOMC maintains contingent outlook? – Deutsche Bank
FXstreet.com (New York) - In terms of the FOMC minutes, the line that best summed it up was that “all participants confirmed that they were broadly comfortable with – the contingent outlook for asset purchases”, notes Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank.
Key quotes
“Under that contingent outlook, the Committee would moderate the pace of its asset purchases later this year if economic conditions improved broadly as expected. In addition, the Fed would wind up its asset purchase around the middle of 2014 if economic conditions continued to develop broadly as the committee anticipates.”
While the “contingent outlook” has been previously outlined by Bernanke, perhaps it was the lack of internal FOMC opposition to that outlook that caused the selloff in US rates and weakness in equities.
Other interesting points from the minutes were the rather short discussion devoted to the back up in bond yields. The minutes noted that some participants felt that “overall financial market conditions had tightened significantly” but some participants also stated that “financial developments during the intermeeting period might have helped put the financial system on a more sustainable footing”.
Key quotes
“Under that contingent outlook, the Committee would moderate the pace of its asset purchases later this year if economic conditions improved broadly as expected. In addition, the Fed would wind up its asset purchase around the middle of 2014 if economic conditions continued to develop broadly as the committee anticipates.”
While the “contingent outlook” has been previously outlined by Bernanke, perhaps it was the lack of internal FOMC opposition to that outlook that caused the selloff in US rates and weakness in equities.
Other interesting points from the minutes were the rather short discussion devoted to the back up in bond yields. The minutes noted that some participants felt that “overall financial market conditions had tightened significantly” but some participants also stated that “financial developments during the intermeeting period might have helped put the financial system on a more sustainable footing”.