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Bernanke’s Final News Conference – Taper Down

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The key thing to remember is that quantitative easing is not ending, it’s barely being reduced. Starting in January, the Federal Reserve will taper QE to a US$ 75 billion pace. Essentially, instead of US$ 40 billion of asset purchases in mortgage-backed securities, the Fed will purchase US$ 35 billion per month. Instead of purchasing US$ 45 billion longer-term Treasury securities, the Fed will purchase US$ 40 billion per month.

Capital markets are happy with Bernanke’s taper announcement; the Dow Jones Industrial Average shot up nearly 1% within 20 minutes of the Federal Open Market Committee’s statement being released. Federal Reserve Chairman Bernanke made it clear that Yellen’s ascension had no bearing on timing of the call to taper.

When questioned on whether the Fed would use other types of means for economic stimulation, Bernanke tiptoed around the idea of favorable discount window rates to banks that could prove they were loaning money to small businesses and households. But he mostly dismissed the idea stating that he feels that tight credit is not the U.S. economy’s main problem.

The FOMC did not modify its forward guidance. The threshold of the unemployment rate for a first rate hike is well below 6.5%. However, Bernanke noted that he will not hike rates merely because unemployment hits this threshold. He wanted to stress that the federal funds rate will remain near zero “well past” this threshold. Once the target is reached, Bernanke suggested that the Fed will look more closely at other types of employment figures, notably the labor force participation rate.

Saudi Aramco and PIF See Opportunities in Russia

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Saudi Arabia’s Public Investment Fund (PIF) is currently exploring opportunities within Russia. PIF is working with the Russian Direct Investment Fund (RDIF) on a number of fronts. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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HNA Group Aims to Shrink and Sell

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Chinese conglomerate HNA Group is on a selling spree due to an order from the government in Beijing to scale back on debt. HNA Group joins Anbang Insurance Group and Dalian Wanda Group in deleveraging from global assets, particularly in hotels and real estate. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Central Bank of Hungary Buys Mounds of Gold

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In October, the Central Bank of Hungary (MNB) boosted its gold reserves by 10 times, from 3.1 tons to 31.5 tons. This was revealed on October 16, 2018. The gold acquired by the central bank in October has a holding value of US$ 1.24 billion.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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