FED To Ease Cliff Uncertainity

The Federal Reserve is set to take more action this week to support financial markets and the economy, as the central bank tries to stay predictable given all the uncertainty surrounding the fiscal cliff.

To accomplish this, the Fed may announce fresh monthly purchases of $45 billion of Treasurys, economists say. These new purchases will start in the new year after the existing Operation Twist bond-buying program expires.

The Fed’s two-day meeting starts Tuesday, and the interest-rate setting Federal Open Market Committee announces its latest monetary policy decision at 12:30 p.m. Wednesday. Federal Reserve Chairman Ben Bernanke gives a press conference at 2:15 p.m.

Under Twist, begun in September 2011, the Fed offset $400 billion of Treasury purchases with sales of shorter-term debt on its balance sheet.

While on the outside, the Fed wants to give the appearance of a steady hand on the tiller, behind closed doors it is another story.

“I think they are terrified of the fiscal cliff,” said Joseph Gagnon of the Peterson Institute for International Economics.

“They are pretty sure there would be a recession if there is no deal,” he said.

MarketWatch

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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