20101103 dollar and the euro 18
In this photo illustration a one Euro coin can be seen next to American Dollar notes. As markets across the globe continue to struggle the world wide credit crunch begins to bite deeper with fears of economic recession. - 


STEVE CHIOTAKIS: On this day after voters handed the GOP keys to the U.S. House, we're going to explore how the things are getting back to normal after all that bitter campaign spending on television.

Today, all eyes in the global financial system are on the U.S. Federal Reserve. The Fed is widely expected to announce today it's going to pump more money into the economy.

Marketplace's Stephen Beard is with us live from London with the Marketplace angle to the story, which is why the Fed move is so important -- and why it has global repercussions. Hi Stephen.


CHIOTAKIS: So why's everyone so interested in what the Fed will do?

BEARD: Well to see if the Fed resorts once again to the ultimate weapon in its armory -- printing more money to but longer dated U.S. government bonds. The Fed will be hoping to drive down long term interest rates in this way so people barrow to buy houses and cars and companies expand. Now economic recovery remains fragile Britain and throughout Europe too so central banks here may well be tempted to follow the Fed's example, says Ian Shephardson of High Frequency Economics.

IAN SHEPHARDSON: This certainly puts pressure on the Bank of England and I would guess that within the next few months they will indeed follow, especially if its deemed to be successful in the States -- if it holds down long term interest rates which what they'll be targeting.

CHIOTAKIS: Alright Stephen, he mentions the Bank of England, what about other countries?

BEARD: Well, the European Central Bank which represents the 16 eurozone countries has been much more cautious about printing money than the Brits or the U.S. But one of the effects of the Fed doing this -- if it works -- would be to lower the value of the U.S. dollar against the Euro. Now that would make it even tougher for European exporters to sell goods and services to the States, so the ECB may then come under pressure to protect European exporters and to follow the Fed's example as well and print more Euros.

CHIOTAKIS: Marketplace's Stephen Beard in London. Stephen, thanks.

BEARD: OK Steve.