Instant View: Fed's September no-taper was 'close call' for many

(Reuters) - The Federal Reserve's shock decision last month not to reduce its support for the U.S. economy was a "relatively close call" for policymakers, according to minutes of the meeting that also suggested there was still broad support to trim bond-buying this year.

STORY:

COMMENTS:

DOUGLAS BORTHWICK, MANAGING DIRECTOR, CHAPDELAINE FOREIGN EXCHANGE, NEW YORK;

Given how weak the economy has been, "it was surprising to me that it was so close a call. However, Fed presidents have spent the last few weeks telling us it was close, so this isn't really news for the market. What is interesting: there does not seem to have been much discussion about the debt ceiling. The market at the time was aware of it, but it doesn't seem the Fed talked much about it, at least based on the minutes."

RICHARD DASKIN, CHIEF INVESTMENT OFFICER, RSD ADVISORS, NEW YORK:

"I think the Fed realizes the greater risk right now is to the downside in growth rather than being too late and inflation getting out of control. By the way, I think some are taking the easy approach and calling Yellen a dove. I think that is wrong. She will wait until she is confident that QE can be withdrawn. And I won't be surprised if that is a bit further out now, but when it happens it won't be a taper. It will be taken away in 1-3 steps- period. My guess."

JOSEPH TREVISANI, CHIEF MARKET STRATEGIST, WORLDWIDEMARKETS, WOODCLIFF LAKE, NEW JERSEY:

The Fed statement that "a reduction in asset purchases might trigger ... an unwarranted tightening of financial conditions," is a succinct summary of the Fed predicament. When exactly will economic conditions permit the bank to withdraw support if the higher interest rates that must necessarily follow tapering will cause a weak economy to falter? To this central question the Fed has provided no answer?"

TODD SCHOENBERGER, MANAGING PARTNER AT LANDCOLT CAPITAL IN NEW YORK:

"It's interesting that there would be such a heated debate, since it is painfully clear that the economy is still in such a fragile state that the Fed can't start the tapering process. Some were looking for improvements in data, but clearly the economy can't stand on its own without intervention. Between slow growth and the shutdown, it's clear we're in troubled times. I wouldn't expect any tapering for quarters from now."

JACOB OUBINA, SENIOR U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:

"It is important to keep in mind that these minutes are very rear view mirror and a lot has transpired since the last meeting. The political landscape has undoubtedly worsened. Recent talk from Fed speakers and the political situation should push tapering out until 2014. Yellen will not create a shift in policy. It will likely be a consensus driven committee if she becomes the president next year."

ERIC VILORIA, CURRENCY STRATEGIST AT FOREX.COM, NEW YORK:

"Overall, if data gets better, we could see tapering later this year, probably not in October because there's been a lack of data and there's still a great deal of uncertainty and a lot of fiscal headwinds that need to be removed.

"But if by December, there's significant improvement, that could result in some tapering later on. It seems that's what most officials at least back at the September meeting were thinking. Obviously, one big risk to that is this political uncertainty and how that's going to impact the economy."

MARKET REACTION:

STOCKS: The S&P 500 held near the high of the day

BONDS: Longer-dated U.S. Treasury yields remained modestly higher

CURRENCIES: The dollar was firmer on the day

(Americas Economics and Markets Desk; +1-646 223-6300)

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