Federal Reserve System is sending rather controversial signals to investors. These days many investors stay appall about the bank’s further monetary policy.
New comments of analysts concerning the issue show disagreement and considerable problems in communicative strategy of the Federal Reserve, as informed by the Analytics Team of the “Market Leader”.
Controversial Comments of FRB Governors
US FRS officials keep giving rather controversial comments. Recent decision of FOMC to maintain the current purchase amount of assets according to the results of September 18-19 has astonished the financial market; according to the bank’s officials, such decision has brought turmoil to traders worldwide.
A new statement about quantitative easing has been made by the member of FOMC Board of Governors, the head of the Federal Reserve Bank of Minneapolis Narayana Kocherlakota, as well as by the head of the FRB of Richmond Jeffrey Liker. However, their comments have brought little clarity into the issue of US Federal Reserve further policy.
According to Jeremy Stein (the member of the Board of Governors of Federal Open Market Committee), the Federal Reserve System is to connect the strategy of cutting stimulation to the indicators of US labour market. Results of annual purchases of assets may continue falling in succession; particularly, while the genera; level of unemployment in the country is falling. Every ninth percentage of unemployment could favour the reduction of corresponding purchase amount of assets within the framework of quantitative easing program. The decision to maintain the current purchase amount of assets made at the recent meeting has been rather questionable; thus, management of the FRS is to do its best in order to eliminate uncertainty in monetary policy.
At the same time the head of the Federal Reserve Bank of Minneapolis Kocherlakota has admitted in her statements concerning the issue that the Federal Reserve should focus on further support of American economy. In her opinion, low inflation makes it possible for the bank to continue the stimulation program in full. This has been informed by the experts of “US News” Department of the “Market Leader”.
In his turn, the head of the FRB of Richmond Jeffrey Like has admitted in his speech that these days the Federal Reserve System is taking the risk to choose a very wrong decision to cut stimulation, whereas this may lead to rather negative consequences in future for the bank and for US economy as a whole.
FRS Risks to Choose Wrong Time for Cutting Stimulation
According to many experts, the combination of such factors as higher volume of assets accumulated by the Federal Reserve, as well as considerable problems in communicating the bank’s further policy, makes it more likely for the committee to make a mistake and start reducing the program of purchasing assets at very inappropriate time.
According to the head of the FRB of Richmond, such decision of the FRS may have very serious impact on US economy. Experts also admit that current problems in communicating the US Central Bank’s further policy are caused by the fact that the bank has brought itself in a trap by its previous actions. Such opinion has been expressed by the head of Nomura Mutual Fund. He has admitted that central banks have found themselves in the vicious circle because of their own monetary policy.
If officials of the US Federal Reserve System have not initiated the program of purchasing assets, the interest rates of debt securities would not have started growing so rapidly at the very early stage of economic recovery, as informed by the experts of GKFX broker company (is included in Masterforex-V Academy rating of Forex brokers ).
Thus, market index of dollar has renewed its three-month low 80.600 formed on June 19, 2013 and stopped at the point of 80.120 dollars:
