FOMC meet today; Bernanke may taper asset purchase
With US Federal Reserve's chairman Ben Bernanke expected to taper the asset purchases by the central bank at the FOMC's two-day meet, market continue to be volatile and wait for the crucial meet.
June 18, 2013 / 19:04 IST
Ahead of the US Federal Reserve's Federal Open Market Committee (FOMC) meet later on Tuesday, The Financial Times reported that chairman Ben Bernanke will likely signal that the central bank is close to tapering down its asset purchase programme.
Observers on the Fed's activities have suggested focusing on the jobs market. They said that the Fed’s stance in the January FOMC meeting that the tapering would begin only after jobs numbers are better. However, the data for May showed an increase in the unemployment rate. Also read: Market pull back to continue; US Fed policy eyed: UdayanRobert Keiser of S&P Capital IQ said, "The markets should be focused on the jobs market. If you look at the 3-month average of non farm payroll growth, it has slowed down every month on average since October. Currently, the 3-month average rate of payroll creation is just a 155,000 a month. The Fed has clearly said that they will taper on improvement in the jobs market and I don’t think you have seen it yet.Meanwhile, some analysts believe that the Fed’s talks on quantitative easing are only to increase uncertainty in the near term. Drew Matus of UBS said, “If you look at how they have changed their tone, they are talking more about (falling) inflation now. So it gives them another reason to keep providing stimulus. A lot of what you are hearing out of the Fed is really just designed to increase uncertainty in the near term. They can’t let the market to price in when tapering ends. If people knew when tapering ended they could figure out the pathway and all the smart people can price that in immediately."Investment strategists believe that the volatility in the US market will continue and expect a pullback in the near term. “History will tell you that the Fed’s analysis is always late. This is a very important in next couple of days. That is why the volatility indices have gone up. But this is not enough to derail the overall bull market which is in place”, said Brian Belski, Chief Investment Strategist, BMO Capital Markets. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
