At-a-Glance: Reactions to Fed’s Inaction
Market analysts probably haven’t been caught off guard to this extent since July 2012 when European Central Bank chief Mario Draghi looked the world straight in the eye and promised to do “whatever it takes” to save the then-tottering euro.
The U.S. Federal Reserve’s decision not to wind back its monthly asset purchase program Wednesday trumps that and then some. Just about every market-watcher, forecaster and analyst thought Chairman Ben Bernanke would start packing away the post-crisis first aid kit to some extent this week. But no.
Here’s a roundup of what the analysts and investors have to say (and a reminder of what several market-watchers thought going into the decision here).
Barclays is among many houses which question the effectiveness of the Fed’s communication strategy in light of its refusal to move.
“We moved to (forecasting) a September tapering after the June FOMC meeting, when the chairman said the committee had ‘deputized’ him to communicate to markets that progress was being made; tapering was coming ‘later this year’; and purchases would be completed around mid-2014, when the unemployment rate was in the vicinity of 7%.”
It argues, with some justification that all the conditions Mr. Bernanke cited as being behind the Fed’s decision – mixed data flow, fiscal drag and the approach of budget and debt ceiling negotiations in Congress – have been visible since March.
Jeremy Lawson, senior international economist at Standard Life Investments, thinks both the Fed and investors should share in the blame, even though he reckons the Fed’s communication in recent months has been flawed. Riskier assets should benefit, he says....MUCH MORE
