It’s the second and final day of the Federal Reserve’s regular policy meeting. Later today we’ll hear what, if any, additional monetary stimulus the Fed Board might endorse as the latest round of quantitative easing is set to expire.
What are economists looking to hear from the Federal Reserve?
“The Fed knows that Operation Twist is ending in December,” points out John Silvia, chief economist at Wells Fargo. “And the marketplace is pretty much looking for [Ben Bernanke] to do something with respect to extending some kind of easing.”
He thinks it’s likely the Fed will announce the purchase of another round of Treasury securities in the amount of $30-45 billion. Silvia also adds that because the economy has improved slightly, that figure will probably end up being on the lower end of the spectrum.
While the Fed has put a lot of emphasis on the housing market, there is still a lot of concern about unemployment in the U.S.
Interest rates are the primary tool through which the Fed can influence the economy, Silvia says, but unemployment is a different story. “It’s a much more complicated area, and it’s much more difficult for the Fed to influence that area,” he says.
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