Why FED planning to stop further easing by mid-2014?

Key Reasons:

1. 1.    The Fed expects US unemployment rate to come off to 6.5% to 6.8% levels in 2014 from current levels of 7.6%. 
2. 2.    US economy is forecast to grow in a range of 3% to 3.5%. 
3. 3.    Inflation expectations are down with the Fed’s core inflation measure the Personal Consumption Expenditure (PCE) being forecast at 1.5% to 1.8% from earlier expectations of 1.7% to 2%.
4. 
   
   Will your investments continue to lose value when the Fed stops further easing? What should you do with your investments in equities and bonds?
   Answer is hold on to your investments
   
   
   Short term volatility will always exist but that should not take away your long term perspective.
   
   
   Key Reasons:
   1.    The Fed is withdrawing additional liquidity infusion into the system on better prospects for the US economy.
   2.     The Fed, however, is not sucking out liquidity nor is it raising policy rates given that inflation in the US is trending at 1.1% levels, well below the threshold tolerance levels of 2%.
   3.    Withdrawal of cheap liquidity will keep the global inflation down.
   4.    Falling inflation expectations helps interest rates in economics such as India to come off leading to falling bond yields and rising equity prices.
   5.    The markets were extremely comfortable in borrowing at Libor and investing in bonds of countries such as India where one year Treasury bill rates are at 7.30% levels.