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Fed terminates QE3; acknowledges improvements in labor market

FXStreet (San Francisco) - Fed's QE3 time of death was 2 pm EDT at October 29, 2014. As expected. The Federal Reserve announced the end of its bond purchases program as the central bank mainly hinted in its previous meetings. The Fed also maintained its interest rate unchanged at 0.25%.

The final decision was taken 9-1 as Kocherlakota voted against the desicion over inflation concerns. He wanted the Fed to continue bond-buying program and commit to extended ZIRP.

The Fed finally acknowledged the improvement in the jobs sector as the central bank upgraded labor market and said labor underuse no longer 'significant'. 'Solid job gains' with lower unemployment.

The statement shows no changes in inflation assessment while the Fed repeated rates to stay lows for 'considerable time'

Main quotes:

Information received since the Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace

Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing.

The Committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

Voting against the action was Narayana Kocherlakota, who believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level.

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