Hawkish FOMC Minutes Hint at an End to Quantitative Easing

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Hawkish FOMC Minutes Hint at an End to Quantitative Easing

Hawkish FOMC Minutes Hint at an End to Quantitative Easing



Some surprisingly hawkish minutes from the latest FOMC meeting indicated the likelihood that US policy makers will end the $85 billion asset purchasing program sometime this year.

Such language has not been heard from the Fed for a number of years and yesterday it kept the buyers in check, halting the rally.

The concern amongst investors seems to be that there is no real reason behind the Fed's hinting a possible end to QE; is it because the economy doesn't need it or is it because QE simply isn't working?

If the economy doesn't need it, then that's not such a bad thing. However if QE isn't working, despite our own BoE constantly telling us that it is, then we have more things to worry about, especially if the US goes through some more serious fiscal tightening.

On top of this, despite a better-than-expected ADP private payroll number, the weekly jobless claims were higher than initially anticipated, adding to the pessimism ahead of today's Non-Farm Payrolls.

As a result, the Dow Jones dipped 20 points to 13,390 and we are already calling the index to open another 10 points lower this afternoon at 13,380.

The inability of US indices to add to their impressive gains from the first trading day of the year is just a mild reminder that markets don't always go up in a straight line. Once again, any strength has seen FinancialSpreads' clients selling short.

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By Simon Denham, 4 January 2013


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