Bernanke: I’ll Do It My Way

The FOMC refrained from tapering any asset purchases last night with the following statement from Bernanke seen as super dovish taking a line I’m still in charge and whilst I am I’ll do it my way with many judging the tone that the path is now clear for known dove Janet Yellen to take the helm at the FED in January. The committee caught the market off guard with only 30% of economists polled by Bloomberg looking for the no taper outcome as they decided that although the economy continues to move towards a condition where they will gradually reduce QE purchases, stating this is not the time as the economy has not reached that point yet and inflation remains low adding that the tightening of financial conditions in recent months, if sustained, could slow the pace of improvement in the economy and the labour market. The message is the same that stimulus is totally data dependent stressing that tapering is not a pre-set course although most of the committee still see rates beginning to rise in 2015 as GDP forecasts we cut by 0.25% in 2014 with 2015 left unchanged at 3.25% as the unemployment estimates were lowered by 0.1% in 2014 but raised the same amount for 2015.

The USD has been slammed in G10 space as it seems unlike the BoE and ECB the FED is willing to take action to stop the market ignoring the message about rising yields and although there are FOMC meetings next month and again in December many this morning are predicting that tapering won’t begin at all in 2013.

Last night’s shock announcement will dominate proceedings today if not for the entire Autumn months but today’s data release highlights are retail sales from the UK with US jobless claims, existing home sales and the Philadelphia manufacturing index to be the focus this afternoon with a possible revision to last week’s claims number following two states failing to report their data due to an IT upgrade glitch.

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