FOMC Looks Ready to Aid Sluggish Economy
WASHINGTON (TheStreet -- Noting that the pace of economic growth has slowed in recent months, members of the Federal Open Market Committee appeared ready to move ahead with additional stimulus measures, according to minutes from its last policy-setting meeting on Sept. 21.
Peter Cardillo, chief market economist at Avalon Partners, believes that additional quantitative easing measures will almost certainly be announced following the FOMC's next meeting in early November.
"It's not a question of 'if' or 'when' but of 'how much' -- will it be $500 billion or in excess of a trillion? The Fed already spent a trillion in 2009 and it really didn't have much of an impact -- so how much is really needed?" Cardillo asked.
Stocks turned positive on the news although the Dow Jones Industrial Average was most recently shedding 9 points, or 0.08%, to 11,001. The S&P 500 was ahead by nearly a point, or 0.08%, at 1166 and the Nasdaq was gaining 9 points, or 0.4%, to 2411."I think this will continue to fuel investors' appetites for equities because interest rates will stay very low and maybe even inch lower," Cardillo said. At the September meeting, FOMC members lowered their outlook for economic activity in the second half of 2010 and slightly downgraded the 2011 growth forecast. Members, however, still anticipate mild expansion next year and see stronger growth in 2012. Meanwhile, continued expectations for economic slack were seen as likely to drag on core inflation in 2011. Furthermore, inflation isn't anticipated to show much improvement in 2012. Committee members agreed that a double-dip recession is unlikely although they also voiced concern that "continued high levels of slack left the economy exposed to potential negative shocks." High unemployment remains particularly problematic, according to meeting participants, because current job growth is so weak that it isn't likely to make a significant reduction in joblessness at a sufficient pace. Regarding further stimulus action: "Many participants noted that if economic growth remained too slow to make satisfactory progress toward reducing the unemployment rate or if inflation continued to come in below levels consistent with the FOMC's dual mandate, it would be appropriate to provide additional monetary policy accommodation." Others, however, felt further easing would only be necessary if the "outlook worsened and the odds of deflation increased materially." The minutes said members weighed several easing options but discussion centered on purchases of longer-term Treasury securities and measures to help inflation expectations. -- Written by Melinda Peer in New York.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV