Federal Reserve may push for another stimulus
With economic storm clouds gathering abroad and signs the U.S. recovery is flagging, the Federal Reserve may feel compelled on Wednesday to launch a new round of monetary stimulus.
Confronted with rising financial strains in Europe, a year-end fiscal showdown in Washington and a sharp slowdown in hiring by U.S. employers, many economists expect the Fed to extend a program aimed at pushing down longer-term interest rates to shield the still-fragile economy.
“The prevailing bias at the Fed is very much tilted toward providing more accommodation,” said Eric Green, global head of rates research and strategy at TD Securities in New York.
A Reuters report details the current climate at the Fed as meetings and expiration date are looming.
An extension of “Operation Twist,” in which the central bank sells bonds with maturities of three years or less and buys securities with maturities of six years and longer, is seen as a less extreme step than outright purchases of new securities. This week is the Fed’s last scheduled policy meeting before Operation Twist expires at the end of this month.
Another option for the U.S. central bank, which wraps up a two-day meeting on Wednesday, would be to push back its estimate for when it will finally raise overnight interest rates, which have been held near zero since December 2008. After its meeting in April, it said it expected to keep them “exceptionally low” through at least late 2014.
Former Federal Reserve Governor Randall Kroszner spoke to FOX whether the Federal Reserve will take further steps to boost the economy.
“They have a lot of different options as to what they can do,” Kroszner said.
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