The minutes of the most recent meeting of the US Federal Open Markets Committee are to be released next week. With the market pricing in a December interest rate hike in the US, insights from the interest rate setting Committee will be raked over for clues on the likely path of monetary policy over the more medium term.
Also in the minutes will be discussion of the unwinding of the US$4.5 trillion Fed’s balance sheet that was built up during the economic crisis, as quantitative easing was rolled out. The Fed has indicated that it will start with a US$60 billion a month unwinding of QE. As this unfolds, the Fed will monitor how markets absorb the mix of bonds being sold back into the market, in concert with the higher interest rate structure.
To date, with the US stock market scaling record highs and bond yields edging up in an orderly fashion, it is safe to say the Fed is managing these policy changes well. That said, the fickle nature of markets is such that some future policy tightening could be the straw that breaks the camel’s back, which of course is why markets are always on edge.
Source: Investopedia
