The Federal Reserve made a splash last week with the release of the FOMC minutes from the central bank’s mid-December monetary policy meeting.
The minutes revealed that despite the dovish developments at the meeting – namely, the introduction of the Evans rule, which ties interest rate guidance to employment and inflation thresholds as opposed to calendar dates – several of the members of the Committee favored halting quantitative easing sometime in 2013.
While not technically inconsistent, the announcement of the Evans rule and the hawkish tone toward asset purchases in the minutes from the same meeting seem to send the market conflicting signals regarding the Fed’s current thinking: is the Committee dovish regarding future monetary policy, or is it hawkish?
On Friday, in the wake of the confusion brought about by the FOMC minutes, St. Louis Fed President James Bullard brought some clarity to the matter when he hinted in an interview that the Fed might consider halting its bond buying when the unemployment rate fell near 7.1 percent.
All of this has sparked a buzz among investors, who for the first time in a long while are talking about the Fed potentially removing the monetary stimulus “punchbowl” from the market.
Read More at businessinsider.com . By Matthew Boesler.