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Playing the Fed blame game

Wednesday, October 30, 2013 - 02:08

Oct. 30 - The Fed once again delayed cutting back on its support for the U.S. economy, blaming a slowdown on D.C. dysfunction. Bobbi Rebell reports.

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Remember that government shutdown a couple weeks back? The Fed sure does. And it's calling out its D.C. colleagues, blaming bickering and dysfunctional politicians for hurting the economic recovery. In their statement after their October 30th meeting saying: "fiscal policy is restraining economic growth." Morgan Stanley's Jonathan Mackay: SOUNDBITE: JONATHAN MACKAY, EXECUTIVE DIRECTOR, PORTFOLIO STRATEGY AND RESEARCH GROUP, MORGAN STANLEY (ENGLISH) SAYING: "The Fed is essentially saying- look we were headed for better growth and then this event happened with the budget as well as the debt ceiling debate. Get out of the way. You know they can't say it that directly." And so, the Fed will continue to support the slower-growing U.S. economy- buying $85 billion of bonds per month- indefinitely... which most economists define as March. Wells Fargo Advantage Fund's John Manley: SOUNDBITE: JOHN MANLEY, CHIEF EQUITY STRATEGIST, WELLS FARGO ADVANTAGE FUNDS (ENGLISH) SAYING: "You got to get the car going. I mean you don't keep the key in the ignition turned to start all the time. At some point in time it kicks over, and at some point in time, the world can bear higher rates. But not yet. " Not yet because things are still bad. The Fed pointed to a number of pain points- including the housing sector. That was hurt by higher rates triggered not by the Fed actually tapering but by the idea of them tapering. Also the labor market- the slow growth of which remains a frustration for the Fed. The Fed made no change in its forward guidance on rates- and expressed more comfort with the current level of interest rates- which Mackay thinks will continue to move higher. SOUNDBITE: JONATHAN MACKAY, EXECUTIVE DIRECTOR, PORTFOLIO STRATEGY AND RESEARCH GROUP, MORGAN STANLEY (ENGLISH) SAYING: "The future is up, but we just think it's on a lower trajectory than it was prior to heading into the September meeting when the market was pricing in an announcement for tapering. So we would expect the 10-year treasury to slowly drift higher though the first quarter of next year." In the meantime- the stock market shows no signs of slowing down. SOUNDBITE: JOHN MANLEY, CHIEF EQUITY STRATEGIST, WELLS FARGO ADVANTAGE FUNDS (ENGLISH) SAYING: "The markets are still going to work hard. The equity market is still not expensive. You still have positive monetary pressure and you still have decent earnings. That's ok. Enjoy it. " The Fed has kept rates new zero since December of 2008. It has more than quadrupled its balance sheet- to $3.8 trillion.

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Playing the Fed blame game

Wednesday, October 30, 2013 - 02:08