July FOMC statement sees upgraded growth outlook & deflation fears diminish

Yesterday’s FOMC statement produced no major changes to monetary policy – As anticipated:

Maintains $85B a month pace of purchasing Treasuries & Mortgage Backed Securities
Kept rates at 0-0.25% as long as the unemployment rate remains above 6.5% and 1-2 year projected inflation remains below 2.5%

Summary of key changes to July’s statement:

Economic activity – “expanded at a modest pace” during 1H 2013 & “will pick up from its recent pace”
Housing – “has been strengthening, but mortgage rate have risen”
Inflation – “persistently below its 2% objective could pose risks” to the economy, but “will move back toward its objective over the medium term”

More importantly, James Bullard dissented in June stating the FOMC should “defend its inflation goal in light of recent low inflation readings”, however he moved back in-line with the consensus view. Thus, it appears he is less worried about deflation and left Esther George as the lone dissenter.

Market response since the announcement:

USD is a little lower versus the majors – Between 10-20 pips across the board
US equities are a bit higher – DJIA +25 points
Treasuries are slightly higher – 10 year yield is 4bps lower

Источник: Forex.com

31.07.2013