FOMC Minutes Spark the Risk-Off
January 4, 2013 in U.S.
The minutes of the December FOMC meeting, released yesterday, spooked the markets and touched off a rally in the US Dollar. Aiding and abetting the move was a better-than-expected employment release from ADP that showed the US private sector added 215,000 jobs, comfortably beating the forecast of 150,000 jobs.
The FOMC minutes revealed that at least some members of the Committee have begun expressing their reservations on the continued bond purchases being implemented by the Fed in the form of monetary stimulus. Markets had taken as a given that the stimulus program was here to stay until the twin guideposts of inflation and employment signalled otherwise.
The rumblings in the FOMC called this assumption into question and instigated a flight to ‘risk-off’ assets that resulted in an appreciation in the US Dollar and pressure on the euro and aussie. FOMC members discussed the timing of an end to stimulus, with some even advocating an immediate end, while others thought the end of the year would be appropriate.