On a relatively quiet Wednesday for data, investors await the policy statement after the Federal Open Market Committee’s 2-day meeting, which will be released today at 2 PM EDT.
Wednesday, October 29, 2014
Analysts anticipate the Federal Reserve to end its third quantitative-easing program and indicate a cautious stance toward interest rate timing.
“Given the recent market turmoil, the Fed is likely to reiterate the ‘considerable time’ forward guidance and the ‘significant under-utilization’ description of the labor market,” economists at Danske Bank told MarketWatch.
QE3 likely gone, but not forgotten
Investors are nearly certain the Fed will lift its third round of bond purchasing known as quantitative easing or QE3, reported The Wall Street Journal. But that does not necessarily mean the program has seen its last day.
A number of policy makers believe QE3 augmented hiring and growth while keeping long-term interest rates low since its commencement in 2012. However, those analysts also regard further quantitative easing as a last resort if inflation and growth were anemic and no other economic tactic proved effective.
The first round of bond-buying came in 2008 as a means of stabilizing the economy following the financial crisis. In that case, most economists agree the technique was effectual, but in the two instances since then, opinions are split.
According to Boston Fed President Eric Rosengren, the Fed has reached the necessary criteria to put an end to QE3.
“5.9% [unemployment] relative to where we were when we started the program is a substantial improvement,” Rosengren told The Wall Street Journal. Even if employment rates fell drastically, he continued, he would exercise other options first. “There are other tools that we can use,” like maintaining low interest rates for significant time.
European indices outperform Wall Street
The S&P 500 opened flat this morning, while the Dow gained 0.1% and the Nasdaq fell 0.3%. European markets showed life at the open, as the Stoxx Europe 600 added 0.4%. If the increase holds, it would be the highest close since October 7. Individual nation’s indices performed well, also. The CAC 40 of France gained 0.3%, the DAX 30 of Germany rose 0.8% and the FTSE of the UK advanced 0.7%.
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