Spreadex Market Update
Bernanke announces possible bond buying halt from mid-2014
After lengthy discussions amongst Fed policymakers, Ben Bernanke announced last night that the intention is to taper the central bank’s unprecedented easing programmes later this year. Bond purchases will be halted around mid-2014, depending on how the U.S. economy performs.
Essentially, we are in a very similar position this morning as to the one yesterday morning. Investors were always aware that tapering was an inevitability, the questions were regarding the timing and savagery of the cuts. It is clear now, as it was yesterday, that curbs to bond-buying hinge on gains in the labour market and the speed of growth.
Global indices tumbled at the prospect of a wind-down, however, most officials don’t expect to begin raising the benchmark lending rate out of its lowest-ever range of zero to 0.25 percent until 2015. Additionally, whilst inflation remains behind the Fed’s 2 percent target, some policymakers will want to refrain from gung-ho cuts.
Interestingly, in the Bank of England Governor Mervyn King’s last speech, he has called once again for further stimulus measure to aid what he sees as a struggling economy. Whilst he agrees that a moderate recovery is underway, King feels that growth is not yet strong enough and more needs to be done to ensure the country's banks no longer pose a threat to taxpayers.
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