Forex Flash: US asset purchased viewed as effective but risky – Deutsche Bank

Looking at the FOMC minutes in more detail, “most participants viewed the asset purchases to date as effective in stimulating the economy, but many participants expressed concerns about potential costs and risks of further asset purchases.” warns Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank. A number of officials said that their evaluation of costs and benefits of the policy "might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labour market had occurred".

Offsetting the hawkish tone, the minutes noted that "several others argued that the potential costs of reducing or ending asset purchases too soon were also significant, or that asset purchases should continue until a substantial improvement in the labour market outlook had occurred". On growth, FOMC members were more upbeat, noting that downside risks had reduced. However, nearly all participants expected inflation for the medium term to remain below the Committee's 2% target.