Fed. Chairman Bernanke is expected to announce new measures today to further ease the long-term interest rate while try to resuscitate the ailing economy suffering from perhaps the worse recession since the 1920s. Since Bernanke’s announcement in Jack Hole, Wyoming on August 26, of changing September’s Fed meeting from a single day to two days, market has been speculating that Bernanke is up to something… as a matter of fact, many analysts are predicting that Bernanke will do one of three things:
Bernanke
While the market isn’t expecting any changes in today FOMC Federal Funds Rate decision, the accompanied Statement and the Press Conferece at 2:15pm are potentially trend changers. With S&P’s recent downgrade still affecting the market, Bernanke will have a chance to calm the market today. Understand that even though there are no expectation of QE3, it is widely believed that Bernanke will stick to his “All the Options” are on the table speech, signaling that further easing has not been ruled out…
While the market isn’t expecting any changes in today FOMC Federal Funds Rate decision, the accompanied Statement and the Press Conferece at 2:15pm are potentially trend changers.
With QE2 scheduled to end this month, Bernanke will be facing the difficult task of addressing the market as to where the Feds stand on future monetary policy, inflation target, economic growth, and of course, Unemployment Rate.
Here’s what most analysts predict:
The real market mover will probably be the accompanied statement, where Bernanke is expected to mention his plan to control the exapnding balance sheet which sits at about 3 trillion USD without risking further inflation. The Fed will probably propose to create a 600 billion Treasury Buying Plan to boost asset prices and convince Americans that the worst part of the economic downfall is over. The idea is to liquidate almost 1.4 trillion in troubled assets (bonds) on the balance sheet and sell them to private equity buyers and using the proceeds to buy longer dated treasuries. Ultimately, the Fed wants to provide a “Bull Flattener” in which long term and short term rates balance to make loans less expensive.
Federal Reserve will probably not surprise the market today. It is likely to keep the current Federal Funds rate unchanged while leaving the 600 Billion Dollar stimulus in place as economy is showing improvement.
The real market mover will probably be the accompanied statement, where Bernanke is expected to mention the recent improvements in Unemployment Rate (which is at 8.9%, the lowest in 2 years), Consumer Spending, and Consumer Confidence.
The Federal Reserve will probably not surprise the market today and keep the current Federal Funds rate unchanged while leaving the 600 Billion Dollar stimulus in place as economy is showing moderate signs of recovery.
The real market mover will probably be the accompanied statement, where Bernanke is expected to take notice on the recent improvement in Consumer Spending, Consumer Confidence, and perhaps improvement in recent credit and bank loans.
FOMC will be releasing its Federal Funds Rate today and it is widely expected that Bernanke et al will keep rates unchanged at the current level, 0.25%, while keeping QE2 at the 600 Billion target unchanged.
