Federal Reserve Bank
- Previous meeting (9/18):
hold at 0-0.25%
Surprise! (well sort of)
- NO TAPER (statement)
(FOMC Minutes released 10/9)
- Latest meeting (10/30):
hold at 0-0.25%, tapering delayed
- Next meeting:
Headlines for US and USD
- Fed’s Williams: I would be disappointed if QE3 didn’t end in 2014 – RTRS
- Gold Technicals – Stable Below 1,250 Post FOMC Minutes
- Bullard: Drags on US economy are waning
- USD/CAD – Loonie Edges Higher After Mixed US Numbers
- October US CPI 1.0% vs 1.0% exp y/y
- October US retail sales 0.4% vs 0.1% exp m/m
- Bernanke Q&A now: Says fiscal sustainability is critically important
- Evans says QE3 purchases since Jan 2013 may eventually hit $1.5 trillion
- USD/CAD – Edges Higher As Markets Eye Federal Reserve Minutes
- EUR/USD – Little Movement As Economic Sentiment Numbers Mixed
- EUR/USD Squared up under 61.8% Retracement ahead of Key US Data
- EUR/USD – Finds Support at Key Level at 1.3550
- USD/JPY demand rebuilding at 102 – orders
- USD/JPY – Rally Continues as Dollar Approaches 103
- GBPUSD eyes 1.6500 on the way to target 1.6617 and 1.6745 into year-end
- EUR/USD – German Retail Sales Sink, But Euro Steady
- Daily Forex Update: NZD/USD
- USD/CAD – Almost Unchanged As US Markets On Holiday
- USD/JPY finding some support as Nikkei stabilizes, cross buyers help out
- GBP/USD – Resistance Level at 1.6250 Fends Off Again
Oct. 30 - The 10/30 FOMC meeting was the first after the government shutdown. That along with unimpressive employment data of late prompted the Fed to delay tapering. While it stays course with the same forward guidance, the bank noted that a slower economic recovery has made it hold off tapering until better data. Nothing surprising, as the market has been pricing in a March taper. Now it will be up to economic data especially jobs data to give the market direction on of the USD. The statement says:
“Taking into account the extent of federal fiscal retrenchment over the past year, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.” – Excerpt from the official statement
Oct. 19 – The minutes revealed that during the 9/18 decision not to taper, there were many members who still felt the fed should start tapering QE in 2013 and end it in 2014. However concerns still loom based on the recently disappointing jobs data as well as a weak economic recovery in general.
The current government shutdown does not help the prospect neither. It will be interesting to see if this will push tapering to 2014. The USD rallied slightly after the release, but this move was not sustained most likely because the market is tentative in adding USD-strength during a government shutdown.
Sept 18 – The much anticipated FOMC announcement surprised many that expected the fed to taper its 85bn/month bond purchase program. Instead, chairman Bernanke explained that the board’s decision was based on the fact that growth is just not consistent yet. This probably had to do with some recently poor employment data.
All in all, the statement and the press conference reflected a dovish tone relative to what the market seemed to be anticipating beforehand.
The USD fell sharply following the risk event.
July 31 – At the conclusion of the 7/31 Fed meeting, the FOMC maintained interest rates and the pace of bond purchase. Some takeaways are:
1) Existing policies for low key interest rate (<0.25%) and bond purchase ($85billion/month) remain the same. The tone remains forward looking to future economic data.
2) One member (Esther George) continues to vote against the accommodative stance for the 5th time in a row.
3) There is concern about the low inflation rate.
4) Growth forecast went from “moderate” to “pick-up from current pace”.
The concern about low inflation means makes it hard to move away from the Fed’s accommodative policies. Improved growth forecast however does give some reason to taper, and the most important signal will have to come from the jobs market.
About the Federal Reserve Bank
Congress has established 3 objectives for the Fed. They are
1) Maximum employment – no fixed rate but has a central tendency of 5.2-6.0%
2) Stable prices – controlling inflation with 2% year-on-year target using the personal consumption expenditure (PCE) measurement.
3) Moderate long-term interest rates
The FOMC decides on how to carry out these mandates, and the 12 Federal district banks carry them out.
The 12 Federal Reserve Banks form a major part of the Federal Reserve System, the central banking system of the United States. The 12 federal reserve banks together divide the nation into 12 Federal Reserve Districts, the 12 banking districts created by the Federal Reserve Act of 1913. The twelve Federal Reserve Banks are jointly responsible for implementing the monetary policy set by the Federal Open Market Committee. Each federal reserve bank is also responsible for the regulation of the commercial banks within its own particular district. (wiki: http://en.wikipedia.org/wiki/Federal_Reserve_Bank).
Learn more about the 12 Federal Reserve Districts from the Federal Reserve website: http://www.federalreserve.gov/otherfrb.htm
Federal Open Market Committee (FOMC)
The committee within the Federal Reserve System that oversees open-market operations and makes monetary policy decisions.
The Federal Reserve Bank of New York president always sits on the Committee, and the other presidents serve one-year terms on a rotating basis. The rotating seats are filled from the following four groups of banks, one bank president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco.
All of the Reserve Bank presidents, even those who are not currently voting members of the FOMC, attend Committee meetings, participate in discussions, and contribute to the Committee’s assessment of the economy and policy options. The Committee meets eight times a year, approximately once every six weeks.
FOMC members (2013)
Ben S. Bernanke, Board of Governors, Chairman
William C. Dudley, New York, Vice Chairman
Elizabeth A. Duke, Board of Governors
Jeffrey M. Lacker, Richmond
Dennis P. Lockhart, Atlanta
Sandra Pianalto, Cleveland
Jerome H. Powell, Board of Governors
Sarah Bloom Raskin, Board of Governors
Jeremy C. Stein, Board of Governors
Daniel K. Tarullo, Board of Governors
John C. Williams, San Francisco
Janet L. Yellen, Board of Governors