The US Federal Reserve last night ended its programme of quantitative easing and suggested to the markets that the first rise in the US base rate could be earlier than expected.
Following some disappointing global economic data, the expectations of a rate hike had been pushed back to late 2015, or even 2016.
But in a statement after its latest Federal Open Markets Committee (FOMC) meeting, the Fed presented a more upbeat assessment of the macro economic environment than it had done in September.
The latest statement was far more upbeat about conditions in the US labour market and household spending and no longer claimed that fiscal policy was restraining economic growth.
The central bank retained its suggestion that it will keep its base rate low for a “considerable time” but this month included a caveat that the timing of the rate rise was now much more closely linked to what is revealed in future employment and inflation figures.
The market interpreted the statement as supportive of an earlier rate rise, though still likely in late 2015, which caused the dollar to rally and US equity markets to wobble.
However, the US markets closed only slightly lower last night, while performance on the Asian stock markets was mixed, suggesting the Fed statement did not trigger bearish sentiment to equities.
