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Little clarity on stimulus wind down from Federal Reserve minutes

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Little clarity on stimulus wind down from Federal Reserve minutes

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The release of the minutes of last month’s US Federal Reserve policymakers’ meeting shed little light on when its stimulus programme might start to end.

The markets are waiting anxiously to see when it might wind down its aggressive quantitative easing programme – that is printing money to buy bonds and boost the economy.

The minutes showed a few Fed officials think it will soon be time to slow the pace of their bond buying “somewhat” while others counseled patience.

Emerging market – which rely heavily on that cheap money – saw further falls in their currencies and shares.

And Kevin Cummins, an economist at UBS Securities, said the Fed still has a lot of flexibility in what it does: “There has been some talk that if they do wind up tapering, that they will lower that threshold on the unemployment rate, possibly to 6.0 percent or even 5.5 percent, to signal that they are going to remain extremely accommodative even further out in the path of policy. So there is kind of different tools.”

A US jobless rate below 6.5 percent of the workforce is the main condition for the Fed keeping its stimulus measures going, with interest rates near zero. Last month it stood at 7.4 four percent.

In the minutes the policymakers noted that the unemployment rate had declined “considerably” since the latest round of bond buying began in September. However, there were signs of “more modest” job market improvement, such as the large number of Americans who had given up looking for work.

“The tone of the minutes do not meaningfully reduce the risk of a September taper,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, noting that jobless figures for August would be crucial.