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EURJPY TECHS

Corrective Cycle Still In Play

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Approaching Recent Highs

FED

Q: Would you consider raising margin requirements re macroprudential?

- A: No we haven't done that...we're focused on dual mandate and the broad financial sector. Not looking at that right now at all.

Q: Markets think you're stuck because you can't go lower than zero and can't go higher because of a taper tantrum. Is the Fed locked in a narrow corridor?

- A: We think our policy is just right and providing significant support for economic activity and hiring. We adopted flexible avg inflation targeting framework in August, and in September we implemented rate guidance that was consistent with and based on that new framework. In December we did same for asset purchases. If you look at the sectors of the economy that are interest rate sensitive you'll see strong activity. "Our policies are working and we think our policy stance is right. That said there's clearly more we can do." Can strengthen asset purchase guidance.

But what you see is not an economy held back from lack of Fed policy support; it's the pandemic. So "we certainly have things we can do, but we think we're in the right place."

Re tapering, "it's just premature", we just created the guidance. We said we want to see substantial further progress toward our goals before we modify our asset purchase guidance. It's just too early to be talking about dates. We should be focused on progress that we'll need to see actual progress. When we see ourselves getting to that point, we'll communicate clearly about it to the public. So nobody will be surprised when the time comes. We'll do that well in advance of actually considering what will be a pretty gradual taper.

MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com