Today consisted of the last FOMC Conference of 2012. Prior to the Fed conference, the FOMC released their statement earlier today stating they will “continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month.”
The already in place $40 Billion in mortgage-backed securities were implemented with QE3 in September. The $45 billion per month of Treasury Securities are taking the place of Operation Twist which concludes at the 2012 year-end.
Today in the press conference, Bernanke stated that he doesn’t think the Fed has the tools to offset the fiscal cliff, if the U.S. were to fall off the cliff. Although Bernanke did not expound on this scenario much, it is a very important statement. In other words, “if the White House doesn’t get their act together, the fiscal cliff is going to take America to such a low point that the Fed may as well not even try to help.”
A gentleman in the meeting asked Chairman Bernanke if the economy went off the fiscal cliff, would the Fed increase stimulus? Reiterating the Fed’s inadequacy to assist substantially, Bernanke also said that the Fed would “perhaps increase a bit” concerning stimulus.
“Fiscal Cliff” a term coined by Bernanke himself, is now the main focus in the American economic arena, now that the FOMC meeting and press conference is out of the way. The fiscal cliff could be the reason small business and consumer confidence levels have fallen recently.
Bernanke also made it clear that it is “exceptionally urgent” that the White House comes to an agreement concerning the fiscal cliff.
The weekly GOP meeting also took place today. Afterwards Speaker Beohner said concerning President Obama “His plan does not fulfill his promise to bring a balanced approach to solving this problem. It’s mainly tax hikes, and his plan does not begin to solve our debt crisis. It actually increases spending.” Boehner also said today that: ““There were some offers that were exchanged back and forth yesterday, and, you know, the president and I had a pretty frank conversation about just how far apart we are,”.
Being “far apart” does not communicate much hope for the fiscal cliff issue being resolved in the next 20 days.
“I certainly hope markets don’t tank” Bernanke today stated regarding the fiscal cliff. The markets certainly could tank if the White House doesn’t come to an agreement soon.
We saw the dollar a little bit of dollar strength today, but nothing signification. It is likely that the market is waiting for the Fiscal Cliff.
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