FOMC Minutes Boost Market
The FOMC minutes revealed that officials discussed the topic of unwinding current support for the economy once a decision on raising the Federal Reserve’s key short-term rate, which has remained near zero since December 2008, is reached. However, the minutes went on to emphasize that the discussion of raising the rate is not an indication that this would happen soon. The general consensus among analysts is that, due to the economy still being in the process of recovery, it is unlikely that the Fed will begin raising rates before mid-2015.
In the past five years the Fed’s bond purchases have pushed its balance sheet over $4 trillion in an effort to boost the economy by keeping long-term rates low. It started scaling back bond purchases in December by $10 billion per month, but officials have noted that they have no plans to start selling their holdings when they stop buying in late 2014. Although an exit strategy had been formulated in 2011, with changing economic conditions and the growth in bond holdings, officials have reportedly conceded that the strategy needs updating, although a time-frame for the update has not been confirmed.