Citing Growth, Fed Again Cuts Monthly Bond Purchases

The New York Times ^ | January 29, 2014 | BINYAMIN APPELBAUM

[John W]

WASHINGTON — The Federal Reserve announced Wednesday another $10 billion cut in its monthly bond purchases in a statement that attributed the decision to “growing underlying strength in the broader economy.”

The statement, published after a two-day meeting of the Fed’s policy-making committee, reflected the optimism of Fed officials that the economy is finally poised for faster growth after years of false starts and setbacks.

It was the committee’s first unanimous decision since 2011.

The Fed said it would expand its holdings of Treasury and mortgage-backed securities by $65 billion in February, down from $75 billion in January and $85 billion each month last year. It added that it was “likely” to continue the pullback, suggesting a similar cut is likely at its next meeting in March.

The Fed did not change its forward guidance that it intends to keep benchmark short-term interest rates near zero “well past the time” that the unemployment rate falls below 6.5 percent. The rate stood at 6.7 percent in December.

[jiggyboy]

It was the committee’s first unanimous decision since 2011.

Yeah ok. It was a pro-forma meeting; the unanimity was a cute send-off for Helicopter Ben.

[RicocheT]

Good that the Fed stuck with the taper and didn’t let a couple of bad days on Wall Street derail it. Of course the whole stimulus/QE/twist/bond buy was a big government boondoggle which ballooned the government debt and sent dollars we didn’t have to big finance/big corporations which suck up to government, instead of making better goods/state & local governments which have Democrat vote majorities.

[Oatka]

In a know-thy-enemy approach, I am on the email list of the World Socialist Web Site, which, once you filter out their usual crap, often has some info not easily found elsewhere.

This snippet is from their article: Turkish interest rate leaps amid currency market turmoil
Following the US Fed’s decision last month to “taper” its $85 billion a month asset-purchasing program to $75 billion, interest rates are expected to start to rise in the US, reversing the capital flows. A study released earlier this month by the World Bank warned that in a worst-case scenario, “emerging markets” could see their capital inflows fall by as much as 80 percent.
If the Fed decides to further “taper” its purchases of financial assets after its meeting today, that could again trigger rapid currency movements.
Brazil’s central bank governor Alexandre Tombini said the “vacuum cleaner” of rising interest rates in the major economies would suck money out of emerging markets and force their central banks to lift interest rates.
Yesterday, the Indian central bank lifted interest rates by 25 basis points, the third increase in the past six months. Other countries could soon follow the Turkish and Indian decisions.

One starts to wonder which Black Swan will appear.

[babble-on]

yes, I was wondering the same thing, i.e. whether some China and Turkey turmoil would have them chickening out the way the Thai Bhat crisis in 1997 took them off of a tightening path after only one hike. Glad at least that they are still tapering, although we are still in a bubble

[Zuben Elgenubi]

If my math is correct or close...If every working American contributed 10% of their paycheck to MyRA that would buy 1 trillion dollars per year in Treasuries.

QE? Who needs QE?

[VRWC For Truth]

No one is buying our debt. We need to cut spending.

[Patriotic1]

So what’s the implication of this?

[Oatka]

So what’s the implication of this?

My reading of it as what that guy in Brazil said, re "vacuum cleaner": investment funds will be sucked out by the U.S. as money heads to higher yields, leaving Third World countries out in the cold and more liable to revolt from within - hence the Black Swan reference.