Fed to continue its liquidity infusion through asset purchases - Angel Broking

As expected, the Federal Reserve's stance in its monetary policy remains unchanged. The Fed would continue with its ultra accommodative monetary policy stance keeping interest rates near zero until employment improves and price stability is maintained at or below its 2% medium-term objective. The policy rate has been maintained at a near-zero level of 0.25%. The FOMC has also decided to continue its asset purchases of USD85bn per month (USD45bn in treasury securities and USD40bn in mortgage-backed securities) to maintain downward pressure on interest rates.

The latest projections peg unemployment rate in 2013 at 7.2-7.3% and estimate a fall to 6.5-6.8% in 2014. Inflation is expected to remain below 2%. The fed has reiterated its commitment to supporting growth through accommodative policy until employment remains above 6.5% and price stability is maintained. Presently, unemployment rate at 7.6% remains higher than the Fed's comfort zone of 6.5% and CPI inflation at 1.4% yoy in May 2013 and 1.1% yoy in April 2013. We expect asset purchases to continue at least until December 2013 post which tapering may ensue.

Source : Equity Bulls

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