- Janet Yellen, Fed Chair
In Janet Yellen's first FOMC meeting as the head of the U.S. central bank, she announced a third $10 billion cut to QE, reducing Fed's monthly bond purchases to $55 billion, which was widely expected by analysts. The Fed's monthly mortgage bond purchases will amount $25 billion, down from $30 billion, while U.S. Treasury purchases will fall to $30 billion a month from $35 billion. It is also anticipated that the Fed is likely to end its unprecedented bond-buying programme this autumn and could begin gradually raising interest rates six months later. However, Yellen highlighted that in deciding how long to keep low-rate environment, the committee will focus on a wider range of information, which now includes labour market conditions, inflation expectations as well as financial markets. Last month Yellen said that the unemployment rate alone is not an adequate gauge of economic health. Thus, the Fed will closely watch not only at how close jobless rate and inflation are to its targets, but how fast or slowly those measures are moving towards those goals.
The reaction in financial markets was immediate and sharp, with the U.S. Dollar holding its biggest advance in seven months against its major counterparts, while Treasury yields rose and U.S. stocks dropped for the first time in three days. The greenback traded at $1.3836 per Euro after rising 0.7% yesterday to $1.3833.
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