The Federal Reserve, already exhausted after a year of missteps in the spotlight, has one last trick to pull off before it exits the stage by getting out of the controversial bond-buying business without causing long-term interest rates to soar. The Fed hasn’t settled on how to do this yet several ideas seem to be under active consideration which could delay any taper of its $85 billion-a-month bond purchase program until next year. Central bankers think long-term interest rates are higher than they should be at this stage of the recovery. Therefore to taper interest rates is a big factor. The labour market remains weak as unemployment @ 7% may actually be over 10% as individuals that have withdrawn are not counted. Inflation is well-below target.   Although yields have come down since the initial alarm over tapering they have not returned to prior low levels. The Fed is struggling to communicate because the bond-buying program is an experiment. The central bank has been surprised at what has attracted the spotlight and moved markets throughout the three rounds of asset purchase programs, he noted. Fed officials have spent the last few months explaining the misstep.

Sincerely, Philip Magnoli –My friends call me Don Filippo- The FX Specialist. 416-362-1300  1-877-943-6739

Reference Market Watch