STOCK MARKET WATCH -- Monday, 11 August 2014

[Demeter]

28. No-Exit Strategy May Be Fed Burden in Unwinding Stimulus

http://www.bloomberg.com/news/2014-08-01/no-exit-strategy-may-be-fed-burden-in-unwinding-stimulus.html

The Federal Reserve is trying to change as little as possible as it crafts its strategy to exit from record stimulus. The trouble is financial markets have changed so much that the still-developing plan may prove costly and ultimately unworkable.

The approach, sketched out in the minutes of the Fed’s June 17-18 meeting and in officials’ comments since then, retains a focus on the federal funds rate as the central bank’s target. Policy would continue to be conducted mainly through banks rather than via dealings with money-market funds.

“They don’t want to make wholesale changes in the way they interact with markets when they are going to have so many other issues in play” as they raise interest rates, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, who has been watching the Fed for three decades.