While expressing rising concern about the US’s fragile economic recovery — which has not been helped by the crisis in the euro zone– the US Federal Reserve will not be launching a third round of hoped-for quantitative easing (QE3) and will continue to keep interest rates low.
This decision, announced on Wednesday after a two-day meeting of the Federal Open Market Committee (FOMC), was expected though not what was wished for by investors and certainly those in the euro zone, hit by pessimistic news earlier including manufacturing slumps in the UK and in euro zone countries including Germany.
While the US economy is stagnant in adding jobs and only moderately growing, the Fed’s holding off of QE3 shows it is taking a “wait and see” approach and that things are not quite, or rather not yet, bad enough for more aggressive measures. The US economy has “decelerated somewhat,” the Fed observed, and officials will “closely monitor” information.
Will the Republicans turn these economic issues into political ones? I suspect we know the answer.
All eyes are who now turned to a Thursday meeting of the European Central Bank (ECB) after which its president, Mario Draghi, is scheduled to announce measures that will, as he stated last Friday, involve “whatever it takes” to “save the euro.” There is speculation the ECB will take “unprecedented” steps to lower Spain’s costs of borrowing to avoid the country with Europe’s fourth largest economy seeking a bailout.
Wait and see, yes.
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Photo by Steve Snodgrass