Markets rallied Monday morning on news of the so-called bail-in for Cyprus, but then fell more than 1% in afternoon trading after comments made by William Dudley, president of the Federal Reserve Bank of New York. Dudley said the Fed may eventually wind down its monthly $85 billion bond-buying program.
“At some point, I expect that I will see sufficient evidence of economic momentum to cause me to favor gradually dialing back the pace of asset purchases,” Dudley told the Economic Club of New York.
What is surprising is the fact that markets panicked after Dudley’s remarks. Dudley’s statement is essentially the same as what Fed Chairman Ben Bernanke communicated last week after the central bank’s two-day policy meeting — i.e. the Fed is committed to its monthly purchase of $45 billion in long-term treasuries and $40 billion in mortgage-backed securities until the unemployment rate falls below 6.5%.
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Source: Yahoo Finance
