"We could begin later this year, but even if we do that, the subsequent steps will be dependent on continued progress in the economy"
- Ben S. Bernanke, Fed Chairman
Nothing. This is what Ben S. Bernanke decided to do, solidifying the standing as the most activist Fed Chairman in history. By a 9-to-1 vote, the policy-setting FOMC yesterday opted out from reducing $85 billion of monthly asset purchases, catapulting stocks to record highs and triggering the biggest rally in Treasuries in two years as investors repositioned for a more accommodative central bank. The Fed cited rising mortgage rates and reduced federal spending as headwinds that might undermine economic recovery in the world's largest economy. However, during a press conference Ben Bernanke reiterated that the bank might still wind down its purchases before the end of the year, but this will largely depend on whether U.S. growth and pace of hiring show a more sustainable strength. Fed Chairman also highlighted that the bank would not raise short-term interest rates any time soon. The reaction in markets was immediate and sharp. The U.S. Dollar weakened to a seven-month low versus major peers and price of gold soared more than 4%.
A separate report from U.S. statistical offices reflected a decent weakness in the nation's property market, as number of housing starts and building permits came weaker than expected. The U.S Commerce Department said there were 0.9% more new housing starts in August, reaching a 891,000 annual rate, but down from analysts' predictions of a 917,000 figure. Moreover, building permits tumbled 3.8%, indicating a lack of drive heading into September.
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