Wednesday, September 18, 2013
The Fed surprised almost all of Wall Street (but not Peter) as it announced no QE reduction today in its press release. The Federal Reserve remains on a war footing with policies in place that most would associate with a depression. So they obviously know something the mainstream does not, and that is the economy cannot stand on its own two feet. Wall Street on the other hand, loves the money printing tree, so went from losses before the announcement to strong gains immediately after. The S&P 500 finished up 1.2% and the NASDAQ 1.0%. Treasury yields took a deep hit, with the 10 year yield falling all the way to 2.69%.
- Bernanke had stated in June that officials expected to begin slowing the pace of purchases later this year and end the program by mid-2014, at which point the central bank expected unemployment to be around 7 percent. In his less committal statement on Wednesday, he said a jobless rate of 7% was not a "magic number" that policymakers were shooting for as they figure out when to halt the buying.
- Among the concerns about economic growth, the Fed in its statement highlighted higher mortgage rates, which have climbed more than a percentage point since May, when Fed Chairman Ben Bernanke first hinted the central bank could begin to scale back the bond-buying program. The Fed also said that federal fiscal policy is "restraining economic growth."
- Most Fed officials indicated in their latest economic projections, also released Wednesday, that they expect to make the first interest-rate increase in 2015 or later.
- Kansas City Fed President Esther George voted against the committee's action because she thought continued accommodation at the current level could hurt financial stability. Ms. George has dissented at all six policy meetings this year.
Gold surged $54.70, or 4.4%, to $1,364.10 an ounce, while silver jumped $1.24, well over 6%, to $23.02 an ounce. Oil popped 2.5% to $108.07.
British stocks fell 0.2%, while German stocks gained 0.45% and French stocks 0.6%; European indexes closed before the Fed announcement.
Japan gained 1.35% while China added 0.3%.