Thursday, October 30, 2014

Fed Announces End to QE - No Surprises

There were no surprises as the FED did what was expected and announced they are ending their QE program for now. They will continue to replace bonds as they mature so they will still be buying large amounts of bonds going forward. And they will not raise interest rates any time soon.

The reaction from the markets was pretty mild overall. What everyone will watch now is to see if the markets react over time the news. In an interview with King World News, former FED official Andrew Huszar said he thinks that the markets will drop again to test the FED in the coming weeks. 

Both Huszar and Jim Rickards had a similar comment. Both said that since QE did not really do anything to help the actual economy, ending it should not really hurt the real economy.  Rickards says that QE only inflated stocks and real estate so those assets might fall back. Rickards also said that since we are in a structural depression, QE makes no difference either way on things like business expansion and wages. He still thinks it will return sometime next year and has not changed his view on that.

Basically there was no real change in the situation from what was widely expected.

Update for GDP:  GDP was announced at higher than expected this morning for the 3rd quarter. So far nothing surprising is happening and markets will likely just continue to watch the FED to see if anything much changes there. There is nothing right now that would indicate any thing major will happen before this year end. After the elections we will see how markets react to that.

Update: IMF Warns End of QE Creates Risks for Emerging Markets

Update: Greenspan comments on Fed QE Policy, Advises buying gold

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