FED to begin paring back its $4.5tn balance sheet

The US Federal Reserve voted yesterday to keep rates steady but indicated it was open to the idea of one further interest rate hike in 2017. FED commentators are lending the greatest probability of a 0.25% hike to the US base rate coming this December. However, ahead of the meeting, markets had already priced in a 50% probability of a December hike which left the actual stock market reaction somewhat muted despite a near 1% rally in the dollar. The main announcement from FED chair Yellen was the intention to begin paring back their multi trillion dollar balance sheet as soon as next month. The announcement, whilst largely anticipated, marks the beginning of the end to an era in which central banks were forced to take extraordinary steps to protect their economies from the worst financial meltdown in modern history.