This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fed Likely To Slow Bond Buys Despite Tepid Economy

By MARTIN CRUTSINGER

WASHINGTON (AP) â¿¿ The Federal Reserve is being engulfed by the one thing it tries to prevent: uncertainty.

Will the Fed take its first step Wednesday toward reducing the extraordinary stimulus it's given the U.S. economy?

Will its eventual pullback jolt the financial markets?

Who will fill several expected vacancies on the Fed's policy board next year?

And, with Lawrence Summers' withdrawal from consideration, who will lead the Fed once Ben Bernanke's term expires in January, ending one of the most tumultuous chapters in the Fed's 100-year history?

Uncertainty tends to rattle investors. Starting this week, the Fed may begin to supply the answers the financial markets are looking for.

Here's a look at the various uncertainties the central bank faces:

TO TAPER OR NOT

Though hiring and economic growth in the United States remain soft, the Fed is widely expected this week to slow the pace of its bond purchases. Its purchases of Treasury and mortgage bonds have been designed to keep long-term loan rates low to get people to borrow and spend and invest in the stock market.

Most economists expect the Fed's initial move to be small â¿¿ a reduction in monthly purchases from $85 billion to $75 billion.

One reason: The Fed for months has been preparing markets for such a move. Fed officials wouldn't likely want to raise further uncertainty by failing to meet the very expectations they had raised.

Another factor: Some Fed officials don't think the bond purchases are doing much good anymore. And they feel that by continuing to flood the financial system with cash, the Fed might be raising the risks of high inflation or dangerous bubbles in assets like stocks or real estate.

Some had once expected a sharper first reduction in the Fed's purchases of around $20 billion a month. But that was before the government said that job growth was only modest in August and that employers added many fewer jobs in June and July than previously thought.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

Chart of I:DJI
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASDAQ 4,636.1050 -140.4030 -2.94%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs