Don’t Expect Tightening from the Federal Reserve
On Wednesday, Federal Reserve officials conclude their two-day monetary policy meeting. Speculation has been rising that the central bank might soon give the printing presses a break, but a weak economy and currency wars are still providing plenty of cover for bond purchases.
Last month, the Federal Reserve started to inject the idea that policymakers were divided about conducting bond purchases beyond this year. The Federal Open Market Committee December minutes stated, “Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.”
The Federal Reserve is known for talking a good game, but at the end of the day, the markets are addicted to quantitative easing and record low interest rates. Growth in the United States and other developed countries is still weak. The latest reading from the Commerce Department shows that gross domestic product in the U.S. decreased for the first time in three and a half years during the fourth quarter. Earlier this month, the International Monetary Fund downgraded its outlook for global economic growth to only 3.5 percent. The organization also expects the eurozone to spend another year in recession.
Other central banks are doing it…
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