Fed stimulus tapering: How expectations continue to swing

Should economic growth warrant a policy change, Federal Reserve officials may begin scaling back its stimulus in the near future. Some analysts are unsurprised, noting that the alternative would be indefinite postponement. 

REUTERS/Jonathan Ernst
U.S. Federal Reserve Chairman Ben Bernanke addresses the National Economists Club annual dinner at the U.S. Chamber of Commerce in Washington, Tuesday. In recent meeting minutes, the U.S. central bank indicated it will consider rolling back asset purchases in coming months.

Asian stocks stumbled and the dollar stood tall on Thursday after minutes from the U.S. Federal Reserve's October meeting hinted at stimulus tapering, while the euro was pressured by speculation of more easing by the European Central Bank.

Stocks dropped on talk of the Fed's stimulus withdrawal, with MSCI's broadest index of Asia-Pacific shares outside Japan and Australia's S&P/ASX 200 index both shedding about 0.3 percent.

Federal Reserve officials indicated at the bank's Oct. 29-30 policy meeting that they could decide to start scaling back the asset purchases at one of its next few meetings provided this was warranted by economic growth.

"The headline that most participants saw tapering in the next couple of meetings cannot be much of surprise, since the alternative is a virtual indefinite postponement," said Steven Englander, global head of G10 FX strategy at CitiFX.

"That said, the 5 percent probability associated with a December tapering seemed too low so there may have been an unwinding of somewhat overly dovish expectations," Englander wrote in a note to clients.

The dollar index, which tracks the greenback against a basket of major currencies, last stood at 81.032 after climbed 0.4 percent on Wednesday in its biggest one-day gain in about two weeks.

The euro was slightly lower at $1.3435, and was also buying 143.40 yen, well off a four-year high of 135.94 yen touched on Wednesday.

The dollar was a touch firmer against its Japanese counterpart, buying 100.13 yen.

The euro plunged on Wednesday after a Bloomberg report said the ECB was considering cutting its deposit rate, one of its two key interest rates, to below zero. An ECB spokesperson declined to comment on the report.

Late on Thursday, the Bank of Japan will conclude a two-day policy meeting. The central bank is expected to maintain its ultra-loose monetary policy and debate how weak exports and swinging expectations about when the Fed will taper its stimulus may affect Japan's economic recovery.

In commodities trading, Brent crude oil rose bout 0.9 percent to $107.92. It surged by more than $1 a barrel on Wednesday after a U.S. official said it would be "very hard" to get a nuclear agreement with Iran this week.

U.S. oil futures for January delivery slipped about 0.1 percent to $93.78, after reversing gains on Wednesday following release of the Fed minutes.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.