— This is the script of CNBC's news report for China's CCTV on October 31, Thursday.
Welcome to the CNBC Business Daily.
The US Federal Reserve has announced that it will continue with its controversial $85 billion a month stimulus program. CNBC's Steve Liesman has all the details:
[Package on tape by CNBC Senior Economic Reporter Steve Liesman] The Federal Reserve putting out a slightly less dovish statement that prompted a bit of a sell-off in bonds and stocks. The central bank maintained its $85 billion dollar pace of asset purchases known as 'Quantitative Easing,' and gave no explicit hint about tapering any time soon.
But the markets saw a slightly hawkish tone through removal of statement to quote "tightening financial conditions" and that mortgage rates have risen further. Both of those statements are gone - here's the significance.
The Fed in September gave three tests for when it would taper. Better financial conditions was one of them, and the Fed seems pretty comfortable with the current level of interest rates and the markets. So, one of the three tests for tapering looks to have been met.
But what about the other two? They remain in place. The Fed still has concerns about the economic outlook, and it still has worries about fiscal restraint. That is, a drawn out and bloody battle over debts and deficits in Washington, which could come in January and February.
That's what makes most Fed watchers comfortable that the Fed won't taper until some time next year, even though financial restraint has eased. Weaker ADP jobs data this morning, along with soft inflation data underscore the points about economic concerns and lack of confidence in the outlook. So, most are betting the Fed won't taper until it at least knows the economic impact of the October government shutdown. That's not likely until December at the earliest. Back to you.
But not everyone thinks the Fed's efforts have helped. Former Federal Reserve Governor Robert Heller shared his concerns with CNBC:
[Soundbyte on tape by Robert Heller, Former Federal Reserve Governor]
The Federal Reserve's quantitative easing has had very little effect as far as stimulating the overall economy as is concerned. Whether it actually hurts remains to be seen. I would give it at most a grade of "C". What worries me really, is that the Federal Reserves says: "Hey, inflation isn't high enough." I think that's a very dangerous path that the Fed is on, and if they continue until inflation raises its ugly head, we will all be in trouble soon.
So with the Fed set to continue easing, how should you be trading the US dollar? Here's what CNBC's guests had to say:
[Soundbyte on tape by John Vail, Chief Global Strategist, Investment Strategy Group, Nikko Asset Management (Nikko AM)] If it is January instead of March, it's going to have some major effect on the markets. Foreign exchange, the US dollar will get stronger, which of course the Europeans will be quite happy about. Interest markets will be off and maybe bonds will be as well. So, it might be a temporary reaction, we don't think it's necessarily the end of the bull market, but it might be a dip in the road for awhile.
[Soundbyte on tape by Ed Rogers, CEO & CIO, Rogers Investment Advisors] First of all you gotta think about USD/JPY and where it goes if the Fed really will start to taper. They will, we know they will - at some point, they have to, and that's going to mean USD/JPY moves. We're currently projecting 2014 range to be 97-107 for USD/JPY. Of course that could be dramatically impacted if the Fed moves suddenly.
Thank you for watching, I'm Sri Jegarajah from CNBC's Singapore headquarters.