A Very Dovish Fed
The surprise decision by the Federal Reserve to delay tapering its current round of quantitative easing is a major setback to our longer-term bullish dollar view. Over the summer Fed officials had outlined a clear timetable for the central bank to start cutting its $85bn a month pace of asset purchases ‘in the next few meetings’ or ‘before the end of the year’ and to end easing altogether by the middle of 2014 when America’s unemployment rate had fallen to around 7%. In contrast, yesterday’s Federal Open Market Committee statement said policymakers had ‘decided to await more evidence that progress will be sustained before adjusting the pace of its purchases’.
Read the full report: UBS