US Federal Reserve cuts stimulus by another USD10bn - Angel Broking

The US Federal Reserve has decided to cut its bond purchases by another USD 10bn by reducing USD5bn in purchase of mortgage backed securities and USD5bn in treasury securities. The quantum of monthly asset purchases would amount to USD55bn (USD30bn in treasury securities and USD25bn in mortgagebacked securities) as compared to the pace of USD85bn announced in September 2012. The policy rate has been maintained at a near-zero level of 0.25%. The Fed indicated that in determining how long to maintain the current 0-0.25% target range for the federal funds rate, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2% inflation. The FOMC continued to maintain that inflation persistently below its 2% objective could pose risks to economic performance and indicated at monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term. Although scaling down of the stimulus is in line with expectations, equity markets reacted negatively on Fed Chairman Janet Yellen's remark in the post policy conference that the Fed could raise interest rates six months after it ends its bond purchase program. The median forecast for the Fed funds rate has been revised upwards to 1% by the end of 2015, up from 0.75% back in December, and 2.25% by the end of 2016, up from 1.75%.

Source : Equity Bulls

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