Investors Look For Clarity on Fed Spending Question

At the last Federal Open Market Committee meeting, Fed Chairman Ben Bernanke hinted that further spending in the form of quantitative easing had not been ruled out. This triggered a stock sell-off as investors saw the comments as a signal that the Fed was expecting the economy to weaken during the second half of the year. With the FOMC meeting again this week, critics are calling for a forthright discussion on what the Fed has planned for the next six months.

“They (the Federal Reserve) have to do a better job of centering expectations of what ultimately the policy intention is and how will they reach that,” said Duy, an economist at the University of Oregon. “Given that we are in uncharted waters for policy, the risks of getting it wrong will be magnified.”

Source: Bloomberg

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