The big news today is the final countdown regarding the Federal reserves tapering of the pace of its asset purchasing program. The Fed’s two day meeting is due to commence today and most analysts are forecasting a reduction of around 10 billion dollars.
Our U.K correspondent U.K had the following to say on the coming taper: “I think this is a real case of travelling and arriving, because I think you have to look back to where bond yields were before we started hearing about tapering, it feels like it’s been a long time but it really hasn’t. Basically in ten years in the US has almost risen 100 basis points, so they’ve already done quite a lot by announcing this taper, and I think now that they’re arriving, they’re realising that the 20 billion initial figure maybe unnecessary because the markets are really expecting it. I think the language is going to be key and I think they’re going to want to show that they are still dovish and that this is tapering, rather than a change in interest rate policy, they really don’t want to spook the markets and they want to make sure that we have escape velocity in the economy… the consensus is that the Fed is going to stay pretty dovish and that the U.S economy is on pretty firm footing. We don’t know if Obama is going to introduce another candidate into the mix, but it is going to be about low rates for a while and an end to these extraordinary monetary conditions, rather than being too hawkish. It almost makes you want to think that Summer’s, who withdrew from the running over the weekend, was saying that this is far too complicated and that he was better off out of it.”