Is More Fed Action the Answer? All Eyes on Bernanke’s Jackson Hole Speech
By Bernice Napach | Daily Ticker 2012/8/27
By Friday mid-morning the financial markets will have turned their attention away from the Republican national convention to focus on Fed Chairman Ben Bernanke. That's when he'll be speaking at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyoming, as he does every year.
The title of this year's speech: "Monetary Policy Since the Crisis."
Financial markets will be looking for any sign of a change in Fed policy, specifically whether the Fed will embark on another round of quantitiative easing. That's when the Fed buys government debt in order to lower interest rates and increase the money supply, which can ultimately boost economic activity.
The Fed has already commenced two programs of quantitative easing (a.k.a. QE), extended "Operation Twist" until the end of the year and depressed short-term interest rates to near zero until at least 2014.
Although there are signs that the economy is recovering from the Great Recession — including data indicating the house market has finally bottomed — minutes from the previous Fed meeting released last week suggest the U.S. central bank is getting ready for another round of QE.
But More Fed easing is not necessarily what the market desires. CNNMoney is reports Monday that 93 percent of strategists it surveyed said they don't support more Fed easing, and 77 percent of economists surveyed agreed.
"Most people think the [economy] is good enough that the Fed doesn't need to do anything big," says The Daily Ticker's Henry Blodget "Interest rates are already extraordinarily low. What will another QE 3 really going to do?" The 10-year Treasury note is trading at 1.66 percent Monday.
The Daily Ticker's Aaron Task says, "It's not clear what additional quantitative easing would do to help the real economy [but] it might help the financial markets."
The Fed will get a clearer view of the real economy when the government releases its latest monthly unemployment report on Friday, Sept. 7. Fed policymakers meet on September 12 and 13.
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