Today, September 13th, 2012 the Federal Reserve Released their accomadations for a third round of quantitative easing.
Beranke made it clear multiple times that the Federal Reserve’s actions are not the ultimate solution and that the Fed, in of itself, is not strong enough to turn the economy around.
[column size=”1-2″ last=”0″ style=”1″] Will QE3 help at all? Will it generate anything other than false assurance of a growing economy? Is QE3 a desperate move to provide America with economic hope as we seem to approach the fiscal cliff?
Today’s FOMC statement states: “The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.”
What do we expect QE3 to do different than the first two rounds? The unemployment rate hasn’t been below 8.0% since the first half of 2009. [/column]
[column size=”1-2″ last=”1″ style=”2″]
In November 2010 the FOMC’s report stated: “ The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.” Earlier in the document they communicated (as they often or always do in an FOMC statement) “the Committee seeks to foster maximum employment and price stability.” (full statement)
That is QE2. Now today we read: “the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.” (full statement)
As I watched/ listened to much of the FOMC Press Conference live today, Bernanke exemplified at least a small measure of confidence. The resounding question is “will the plan work?”.
General George Patton said “a good plan today is better than a perfect plan tomorrow”. So, it’s good that we have a plan but, will this plan be executed and will it be successful?
While the first rounds of quanitiative easing lowered interest rates, unemployment has not shifted much. The interest rates can’t get much lower than they are now. Are they shooting in the dark here? Shadow boxing?
Markets haven’t reacted too violently. With mixed thoughts and feelings, I’d imagine some initial choppiness will take place in the market. Tomorrow’s London session may present a more established trend.
Check out Forex Factory for multiple news stories on this topic.
Here is a 4 Hour chart of the EUR/USD:
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