Several days of strong growth ended Wednesday when the Standard & Poor 500 Index rose less than 0.1%. The transcript of the Fed’s late June meeting was released in Washington today with language that concerned investors. Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said, “Tapering, whether it will be this year or next, is inevitable. The market was initially encouraged that the Fed is waiting on additional data, but possibly taken aback by the fact that about half the participants indicated that asset purchases should end later this year.”
The dollar collapsed against a basket of currencies today, ending its three-year high, and posted pronounced losses against the yen while the market awaited the Fed’s meeting and Ben Bernanke’s speech. “It is unlikely the Fed minutes will contradict expectations of Fed tapering, especially on the heels of last week’s strong jobs data,” said Vassili Serebriakov, foreign exchange strategist at BNP Paribas in New York. “The market remains bullish on the dollar and with long positions quite large, we are seeing some profit-taking and position-squaring ahead of today’s events.”
Delivering a speech about the 100-year history of the U.S. Central Bank that made no direct reference to current monetary policy, Federal Reserve Chairman Ben Bernanke instead underscored that policy makers need to learn the hard way to treat financial stability as a key goal. “The recent crisis has underscored the need both to strengthen our monetary policy and financial stability frameworks and to better integrate the two,” he said in remarks prepared for delivery to a conference sponsored by the National Bureau of Economic Research.