Federal Reserve plans to begin its exit strategy

The latest Fed minutes revealed the manner in which Chairman Ben Bernanke and the Federal Reserve plans to begin its exit strategy, but not when it will do so.

The proposed order for the exit strategy would be to initially halt the reinvestment of principal on bonds the Fed holds, followed by altering the forward guidance on the federal funds rate. Next would come the actual increase of the target for the federal funds rate, and finally the selling of agency securities after the first rate increase.

The initial reaction in financial markets consisted of:

gold surged above $1,570, within a fraction of its all-time high

the U.S. Dollar Index sunk to an intra-day low near 76.10

U.S. equities turned modestly positive, with the Dow Jones Industrial Average up 0.2% at 12,530.81

U.S. Treasuries showed a muted reaction, remaining fractionally higher