The Fed Didn't Do It!
The Federal Reserve shocked the markets and extinguished analysts' expectations when they announced that no accommodation reductions are to occur as of yet, meaning that the Fed will continue buying bonds at the current rate of $85 billion a month. Many analysts thought that the Fed would be reducing accommodations by $10 to $15 billion a month.
The reasoning behind the decision? It seems that the Fed wasn't happy with economic growth, and couldn't see a reasonable way to move forward without quantitative easing, as CNBC's Steve Liesman reported.
"To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored," the Fed said in its statement.
Related: Is The Taper Priced In?
"In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."
The news has sent stocks skyrocketing, with bond yields taking a direct dip.
At the time of this writing, Jason Cunningham had no position with the mentioned entities. Visit Jason on Twitter @JasonCunningham.
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