"No decisions regarding policy normalization were taken; participants requested additional analysis from the staff and agreed that it would be helpful to continue to review these issues at upcoming meetings"
- FOMC minutes
The latest FOMC meeting showed that the end of the quantitative easing was a major talking point. It is a well-known fact that the central bank used to change liquidity until the official Fed Funds Rate is achieved, however, enormous monthly purchases of assets led to the excess reserves held by commercial banks, $2.6 trillion to be more precise. At the moment, rounding the stimulus programme is not an option for the central bank in order to reduce the excess liquidity. A sharp reduction will indicate policymakers will have to sell billions in bonds again, and it seems that markets are unlikely to get over the potential shock. And it is definitely the last thing the Fed wants now and will try to avoid at all costs. A closer look at the most traded currency pair is suggesting the greenback was unable to benefit from the latest policy meetings. In contrast, it seems that the Fed is not in a rush and it completely pleased with the current situation. Yellen claimed there is no trade-off between the employment and inflation. The recent statistics only supported the case for a still dovish bias and until now there has been no evidence the FOMC can hit the break harder than usual.
The Chairwoman has not missed any opportunity to refer to the struggling labour market, as the latest labour market statistics have been contradictive. Nonetheless, jobless claims around 300,000– mark is a very bright spot of the world's largest economy.
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