U.S. ECONOMICS: RBC On Today's Fed Minutes
Royal Ban of Canada (RY, RY.TO) says the minutes indicate that the Committee's decision to begin tapering the pace of asset purchases in January reflected "cumulative progress in labor markets since the beginning of the current asset purchase program as well as expectations for further employment gains given strong underlying growth momentum." It says little new information was revealed on the pace of tapering going forward with the Committee maintaining that while asset purchases are not on a preset course, further reductions in monthly purchases will proceed in "measured steps" should economic conditions unfold as expected. It notes, however, most participants expect the asset purchase program will be concluded in the second half of 2014.
RBC says the minutes also indicate that the decision to strengthen the forward guidance framework was partially motivated by concerns that tapering would shift market expectations and could cause an unwarranted tightening in financial conditions. The new forward guidance that the fed funds rate may be held in its current range "well past the time" unemployment falls to 6.5% if inflation stays below the 2% target supports its view that the Fed will hold its policy rate steady until late-2015.
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