Details divulged by the latest Fed minutes, released today, are for the most part as might be expected, with Fed officials optimistic enough about the outlook for economic growth to warily opt for a reduction in stimulus at last month’s FOMC meeting.
The minutes show that ‘many members judged that the committee should proceed cautiously in taking its first action to reduce the pace of asset purchases and should indicate that further reductions would be undertaken in measured steps.’
Once again, officials at the central bank were keen that the market should understand that the future of the Fed’s quantitative easing programme depends on how the economy performs, feeling the need ‘to underscore that the pace of asset purchases was not on a preset course and would remain contingent on the committee's outlook for the labor market and inflation as well as its assessment of the efficacy and costs of purchases.’
Although clearly a large portion of the committee were agreed on the action as taken, there was evidently still some division in the ranks, with some calling for a larger reduction, some proposing a ‘deterministic path for winding down’ stimulus, while others argued that slack in the labour market and below-target inflation ‘warranted continuing asset purchases at the current pace for a time in order to wait for additional information confirming sustained progress toward the Committee's objectives.’
The stock mark appears ambivalent to the Fed's positive outlook for the economy and the associated likely path of tapering: with half an hour to the close on Wall Street, the Dow Jones was down 0.68% or 111 points, while the S&P 500 was off by 0.26%.
Tomorrow we have jobless claims and Alcoa reports after the market closes on Thursday, unofficially kicking off the US reporting season.