Fed surprises; keeps bond buying programme intact

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Fed surprises; keeps bond buying programme intact
The US Federal Reserve sprung a pleasant surprise for markets and economists keeping its $85 billion-a-month bond-buying program intact.

The Fed said it will wait for "more evidence that progress will be sustained" before it starts to cut its asset purchases. The move was pleasantly surprising as economists and analysts in general were expecting a taper to the tune of $10 billion.

"Conditions in the job market today are still far from what all of us would like to see," Chairman Ben Bernanke said at a press conference after the conclusion of a two-day meeting of the Federal Open Market Committee.

Bernanke said, the "Fed's rate guidance and its ongoing holdings of securities will ensure that monetary policy remains highly accommodative, consistent with an aggressive pursuit of its mandated objectives of maximum employment and price stability.

The Fed's move sparked a rally across markets including the US, where the Dow Jones and the S&P 500 posted new lifetime highs.

In Asia all the markets were trading higher led by a furious rally in the Jakarta Composite, which gained almost 4% in trade.

The Philippine's PSE Composite was higher by 3 percent and Malaysia's KLCI Composite added 1 percent.

Indian markets are expected to rally at least 3% in trade as risk assets are back in vogue. Meanwhile, the dollar fell against a basket of currencies following the Fed decision.

The Federal Reserve has been buying bonds to the tune of $85 billion each month. This has unleashed a wave of liquidity which has found its way into gold and stocks, particularly emerging market stocks.

The Fed's decision not to taper or cut down on its bond buying programme, means that liquidity would continue and push stock prices across the globe higher.

GoodReturns.in

Story first published: Thursday, September 19, 2013, 8:47 [IST]
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