The U.S. economy settled a volatile week focused on Federal Open Market Committee minutes alongside Obama’s speech over spending cuts “Sequester”.
Federal Open Market Committee published the minutes for January 29-30 meeting that had a strong impact on the market. The Fed’s decided to continue the 85 billion of monthly bond purchase program without sitting an expiry date was still a matter of debate, more members continue to see the likelihood for the start of exit from the accommodative policy this year.
Policy makers “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes on the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved.” The impact was indeed dollar positive that continued to extend the gains this week against major rivals.
Policy makers expressed potential risks regarding the super-easy stimulus program, as it could stir financial stability risks, as well as inflation and costs to the central bank.
The economy remains in focus for the Fed and for the Obama administration as well. In a speech at the White House on Tuesday, President Barack Obama warned from the harmful impact of automatic spending cuts on economy and for the middle class in particular.
President Barack Obama said that spending cuts will cause job losses and would “visit hardship” on many people by saying that unemployment may “tick up again” where “people may lose their jobs” if it become active at March 1 st .
On March 1, the automatic spending cuts dubbed under the "sequester" are scheduled to begin, with nearly 1.2 trillion divided between defense and non-defense spending cuts over the next 10 years.
Economic hardship remains of the essence, especially after the sharp downturn in the fourth quarter. Fed’s disagreement over the scope of QE might be calmed with contained inflation pressures, buying time for the Fed to keep the focus on reviving growth. Consumer and Producer Price Indices showed that inflation risk is under control; easing the Fed’s concerns over the outlook for price stability and risks imposed from excessive easing.
Growth remains fragile and the volatile economic performance is clear; manufacturing sector shrank unexpectedly in Philadelphia district, as the Federal Reserve Bank of Philadelphia manufacturing index fell dramatically -12.5, compared with Januarys outlook of -5.8, contrary the improvement in manufacturing sector in New York a week earlier.
Earnings were a positive impute for the week, HP, Dell Inc, Wal-Mart and Howell Packard besides other firms posted profits, where most were upbeat results beating expectations.