Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Today's FOMC Meeting Will Prove That Team Bernanke is Out of Ideas

Interest-Rates / US Interest Rates Sep 21, 2011 - 07:03 AM GMT

By: Money_Morning

Interest-Rates

Best Financial Markets Analysis ArticleKerri Shannon writes: If you're handicapping the U.S. Federal Reserve's two-day Federal Open Market Committee (FOMC) meeting that concludes today (Wednesday), you can make the following two predictions - and you'll almost certainly be right:


•U.S. Federal Reserve Chairman Ben S. Bernanke will announce some form of economic stimulus.
•But the short-term benefits will be small, and any long-term benefits won't be enough to help out-of-work Americans or jump-start the wheezing U.S. economy.

"I do think the Fed will intervene," Money Morning Chief Investment Strategist Keith Fitz-Gerald said in an interview. "But I don't believe for a second that the central bank's intervention will help the U.S. economy."

Troubling Trends
If anything, the nation's economy looks worse today than it did on Aug. 9, which is when central-bank policymakers last met. The "official" unemployment rate remains at an alarming 9.1% - with no jobs added in August - and true joblessness may range from 17% to 23%. Housing starts declined last month by the greatest amount since April. And the International Monetary Fund (IMF) just downgraded its U.S. growth forecast to 1.5% from 2.5% [To see related story in today's issue, please click here].

The spreading European sovereign debt crisis continues to whipsaw stocks, oil prices and gold. And several dramatic single-day plunges - in stocks and in gold - spooked investors for days after the event.

Bernanke feels pressure to act, but the odds that Federal Reserve policy can make a meaningful splash are low indeed, Money Morning's Fitz-Gerald says.

What to Expect From Today's FOMC Meeting
Since the Fed's actions have so far done little to ignite economic growth, investor expectations were muted ahead of today's FOMC meeting conclusion.

"It looks like the market is baking in an announcement of some kind of quantitative-easing strategy," Deirdre Dennehy, portfolio manager at Rockland Trust, said in an interview. "[But] for them to announce a QE3, I'm not sure how impactful that's going to be. The more times they do that, the less the effect in the market."

Analysts expect the Fed will attack longer-term rates by adjusting its $1.7 trillion portfolio of U.S. Treasury securities.

At its last meeting, the Fed announced it would keep short-term rates near zero until 2013. Since the central bank has no more room to reduce rates, this time it'll make a move to encourage borrowing and spending.

"My guess is it's going to look something like "Operation Twist" from the 1960s," Fitz-Gerald said in a Bloomberg Radio interview. "They're going to probably print more money, buy more Treasuries. They're looking to manipulate, or twist, the yield curve by flattening it out."

The government first used this "Operation Twist" tactic in 1961. The expectation is the Fed will sell debt maturing in three years or less and buy mostly seven to 10-year notes to flatten out the yield curve so that long-term borrowing gets cheaper. The goal is to get corporations to spend their cash piles and push investors out of safe-haven Treasuries and into stocks.

"They're literally trying to force scared consumers and scared investors into the market," said Fitz-Gerald. "They're trying at the same time to free up that logjam of funds that corporations are, in fact, sitting on."

Markets have already anticipated a move like "Operation Twist," and yields on 10-year Treasury notes have slipped to 1.94 % from more than 3% in July. That's the lowest yield on the Treasury notes in more than 50 years. But the Fed move could still lower the 10-year rate by another quarter-point at today's FOMC meeting

If billions of new dollars are actually pushed into the financial markets by a central bank action, the stock-and-bond markets will see some gains. But any such gains will be short-term in nature - just as they were after earlier quantitative -easing measures, Fitz-Gerald said.

"Look at what happened when Bernanke waded into the market with QE1 [and] QE2 ... the markets tended to like that," Fitz-Gerald said. "But longer term, the economic system is very different from the market system, and that's the underlying issue here."

C entral-bank policymakers do have a couple of other policy options. According to minutes from its last meeting, the Fed could opt to trim the 0.25% rate it pays banks that store excess reserves at the central bank.

It could also institute a third round of bond buying, or QE3. But policymakers are likely to avoid this maneuver, due to the heavy criticism that followed QE2.

Anything the Fed does announce is expected to be a small initiative, with more aggressive action held until the next meeting in November.

"These are tinkering measures, not the financial bazooka, so to speak," Carl Riccadonna, senior U.S. economist for Deutsche Bank AG (NYSE: DB), told Reuters. "If we get to a period where the employment numbers turn negative - then I think there will be much more agreement on the Open Market Committee that they will have to do something bolder. We're certainly not there yet."

Regardless of what weapon the Fed chooses, investors are clearly skeptical that Team Bernanke can draw a winner from its arsenal at today's FOMC meeting.

"With banks still repairing their capital positions and interest rate levels hardly an impediment to growth, the Fed has run out of effective tools to do anything more than marginally affect markets, and whatever it does from here is basically politically driven and will have little economic impact," Josh Shapiro, chief U.S. economist at MFR Inc., wrote to clients.

The Fed is scheduled to announce any actions recommended at today's FOMC meeting at 2:15 p.m. EDT.

[Editor's Note: When a big news story breaks, wouldn't you like to hear what kind of investment advice Money Morning experts Keith Fitz-Gerald, Martin Hutchinson, Peter Krauth, Shah Gilani and Dr. Kent Moors are giving to the subscribers of their high-dollar trading services?

Now you can.

Money Morning's newest service, Private Briefing, gives subscribers access to the daily briefings these experts are providing to Executive Editor William Patalon. Each day, Patalon provides Private Briefing subscribers with the best investment recommendations he's received - at a cost of only $5 a month for charter subscribers. In the first month of publication alone subscribers have realized some significant gains on silver, gold, oil, and other key global trends. To find out more, please click here.]


Source : http://moneymorning.com/2011/09/21/how-high-oil-prices-will-fuel-europes-next-economic-crunch/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules