All eyes on Bernanke as FOMC meeting nears conclusion

Ben Bernanke, Chairman of FOMC

An announcement is expected from the Federal Reserve’s FOMC (Federal open market committee) at 2.30 pm EST or 5.30 pm GMT after two days of deliberations on whether the Fed should intervene further to prop up the US economy.

The Fed is also committed to an environment of ultra low interest rates until at least 2015, but recent comments from Chairman Ben Bernanke seems he is ready to add to the current monetary easing measures and pump in further stimulus if needed, potentially even more quantitative easing (QE). 

After two rounds of QE to date, where the Fed buys Treasury bonds, investors are waiting to see if today is the day for QE3 to be announced. Good news for equities and gold in this scenario. The assumption being that more money printing will both stimulate the economy and add to the risks of inflation in the future.  

With the US property market starting to show signs of life but with employment still looking patchy at best, it may be a case of the FOMC adopting a wait and see policy to see if its existing bond buying programme, including Operation Twist (swapping long term bonds for short term) is actually working before burdening the Fed balance sheet with even more debt.

This is one of the most closely watched meetings for global investors and now more than ever, stimulus fever is rife!

Contrarian Investor UK