QE2: Will the Fed Surprise the Markets?
(Updated with latest ADP private-sector employment numbers)
NEW YORK ( TheStreet) -- Will the Federal Reserve's move to boost the flagging U.S. economy be too little to make a difference or will it be too much, too soon? That is the big question for investors anxiously awaiting the Federal Open Market Committee statement on Wednesday afternoon.
The S&P 500 has risen 14% since the central bank first hinted that it will resume the purchase of long-term assets to boost the economy -- dubbed QE2 -- in August. While the prospect of quantitative easing has driven down the dollar and helped push up stocks, investors remain uncertain of what the actual outcome of the Fed's move will be on the economy and job growth, as the central bank heads into unchartered territory.
Skeptics have said that further quantitative easing will do little to help an economy that is stuck in a "liquidity trap" and would only succeed in creating dangerous asset inflation. Supporters argue that the Fed must use every tool it has at its disposal to prevent the economy from slipping back into a recession and to keep the threat of deflation at bay.Fed chairman Ben Bernanke and his colleagues have, in various speeches over the last two months, tried to steer market expectations in a spirit of transparency. But
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