Friday, August 26, 2011

Friday Post #2: Much ado about nothing?

The much anticipated meeting of the Federal Open Market Committee (FMOC)  put off a lengthy discussion of the easing options available to the US Federal Reserve until the next FMOC meeting late next month.

“The Fed has a range of tools that could be used to provide additional monetary stimulus,” Chairman Ben Bernanke said.

These options were discussed in August and “we will continue to consider these and other pertinent our meeting in September.”

Bernanke announced that the Fed had decided to expand its September meeting to two days – Sept. 20 and 21 – to review the pros and cons of further easing. 

“The Fed is not prepared to act at this point, but kept a bias to ease in place,” said Peter Hooper, chief economist at Deutsche Bank.  

Many Fed watchers had expected at least a discussion of the options in today’s speech. Financial markets have been waiting for the speech to hear Bernake’s views on whether he thinks the economy will avoid a double-dip recession and what steps he might be willing to take to stave off a possible severe downturn.

But Bernanke refrained, saying it was unclear how recent stock market weakness, debt-ceiling negotiations and the European debt crisis had impacted the economy.

“It is difficult to judge by how much these developments have affected economic activity thus far, but it seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth,” Bernanke said.

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