Yesterday, the Federal Open Market Committee (FOMC) meeting minutes revealed that almost all policymakers agreed that the asset purchase program should be maintained at least until the middle of the year.
Unfortunately, that’s where the members’ consensus stopped. Some suggested that they scale back their quantitative easing program in September, while a few wanted to keep the current bond purchasing plan intact until the end of 2013 or the first half of 2014. The minutes also hinted at increasing the program if the economic situation gets worse.
For now though, every single one of FOMC members agreed to soldier on with the program until the labor outlook has improved “substantially.”
The news that the Fed is no hurry to end its stimulus program encouraged optimism among the U.S. stock players. Currency warriors weren’t that impressed though, as the dollar failed to show significant reaction against its counterparts. Heck, EUR/USD erased all of its gains within minutes after the FOMC minutes was leaked!
I can’t blame the dollar traders for shrugging the news off. After all, we already know from Bernanke’s previous speeches that the Fed is closely watching Uncle Sam’s labor conditions. And after the big miss in the NFP report last week, no one was really convinced that the Fed would start scaling back its asset purchases anytime soon.
Although it’s a positive sign for the dollar bulls that the Fed has some sort of deadline for withdrawing stimulus while the other major central banks are coughing out new ways to pump up their economy, we just can’t be too excited yet.
The fact of the matter is, the Fed’s ultimate decision on monetary policy still relies heavily on the labor conditions. And we know from the most recent jobs report that it could be a while before we see any significant improvements. But hey, at least now we know that at least some of the members are open to the idea, right?