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Janet Yellen Continues to Taper

The new chairman of the Federal Reserve Janet Yellen continued where Ben Bernake left off. On Wednesday evening the it was announced that the Federal Reserve would taper their monthly asset purchases by $10bn in April, as they had in recent months, easing the US economy from the stimulus as growth begins to gain pace. As expected interest rates were left unchanged at the record low of 0.25%, but hinted that rates could rise in 2015, which would be about 6 months after it is has finished its monthly asset purchase programme. The Fed purchases a mixture of mortgage backed securities (MBS) and Treasury securities as a form of quantitative easing, the timing and pace of exit has been a major focus of market commentators for the last 18 months.

The initial Federal Open Market Committee statement for the 19th March 2014 had dovish comments, highlighting that they would consider a broader range of economic indicators, rather than just the unemployment threshold of 6.5%, as a signal to increase interest rates.  Janet Yellen the headed the press conference with a Q&A session, that had a more hawkish tone than the FOMC statement.

The USD was bid agains the Euro and Yen following the comments, and Gold sold off aggressively, unwinding the recent gains from safe haven flows due to the Ukraine/Russian tension. 

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