Investors have prepared for the Federal Open Market Committee (FOMC) meeting today and tomorrow to end with the announcement of a third round of quantitative easing (QE3) - and that's a good bet to make.
Today's Fed meeting will likely end with more of the same information we've been hearing for months from U.S. Federal Reserve Chairman Ben Bernanke. It's been a year and a half since Bernanke first announced that short-term interest rates would remain near zero "for an extended period." That language will likely stay the same tomorrow, and the policy timelines could be drawn out even longer.
There is also no doubt that QE3 or some other meaningful economic stimulus measure is on its way.
Maury Harris, an analyst with UBS, declared in a recent note to clients that, "We now anticipate an announcement of another round of quantitative easing at the FOMC meeting on September 13th. We expect the easing will take the form of a six-month program of at least $500 billion, primarily focused on Treasuries."
Harris also added that, "We also expect the FOMC extends their rate guidance into 2015."
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Fed Meeting Today: Are You Ready for QE3?
Today's FOMC Meeting: Fed Votes Operation Twist to Continue
Today's FOMC meeting - which started Tuesday - ended in a widely expected manner.
The Fed announced it will extend Operation Twist, which was set to expire at month's end, until the end of 2012, in an effort to keep interest rates low.
The Fed will expand Operation Twist, which replaces short-term bonds with longer-term debt, by $267 billion.
In a statement, the FOMC said the prolongation of Operation Twist "should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."
The Fed pointed to the U.S. economy's poor recovery as reason for more "twist."
"Growth in employment has slowed in recent months and the unemployment rate remains elevated," the Fed reported. "Household spending appears to be rising at a slower pace than earlier in the year."
The lack of more intense stimulus, namely a third round of quantitative easing, sent the Dow Jones, which had been flat all day, plummeting some 50 points in just seconds. All three major indexes treaded lower following the report. Gold, hoping for QE3, sold off some $25 an ounce.
The yield on the 10-year Treasury note rose to 1.67% just after 1 p.m. in New York from 1.62% late yesterday.
The Fed announced it will extend Operation Twist, which was set to expire at month's end, until the end of 2012, in an effort to keep interest rates low.
The Fed will expand Operation Twist, which replaces short-term bonds with longer-term debt, by $267 billion.
In a statement, the FOMC said the prolongation of Operation Twist "should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."
The Fed pointed to the U.S. economy's poor recovery as reason for more "twist."
"Growth in employment has slowed in recent months and the unemployment rate remains elevated," the Fed reported. "Household spending appears to be rising at a slower pace than earlier in the year."
The lack of more intense stimulus, namely a third round of quantitative easing, sent the Dow Jones, which had been flat all day, plummeting some 50 points in just seconds. All three major indexes treaded lower following the report. Gold, hoping for QE3, sold off some $25 an ounce.
The yield on the 10-year Treasury note rose to 1.67% just after 1 p.m. in New York from 1.62% late yesterday.
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What's Different About this Week's FOMC Meeting
The two-day Federal Open Market Committee (FOMC) meeting starting today (Tuesday) marks a historic shift in how the U.S. Federal Reserve communicates its policy decisions with the public. The changes center on disclosing individual FOMC members' interest-rate forecasts and economic projections. It may also release an agreed target for inflation. "It's a significant innovation," Jeremy […]