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Eurocrisis: The Fed Says, “Wait and See”

Eurocrisis: The Fed Says, “Wait and See”

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.

Manufacturing has been  slumping in the US (after 34 months of expansion); it is also weakening in China.

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

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4:25PM PDT on Aug 8, 2012

Whether you hate the Fed or not, this was reasonable. The U.S. economy is still showing modest growth in some sectors and we won't know the full Euro story until Thursday. After all, financial institutions are supposed to be conservative in their policy prescriptions.

12:55PM PDT on Aug 3, 2012

Does anyone really know what will work? It is doubtfull.

10:45AM PDT on Aug 3, 2012

The big problem is that the stimulus isn't working. Instead of bailing out those businesses to big to fail had the money gone to the American people it could have created spending which would help create jobs and such. Our problem is that our government is polarized and can't seem to do it's job. The other problem is the lack of jobs and the number of people who have been thrown out of their houses illegally by the very banks and finance companies our government gave money to. There is also a huge disagreement about what helps.

3:13PM PDT on Aug 2, 2012

A problem of artificially low interest rates that is seldom discussed is that many individuals depend on interest income in order to meet their living expenses such as seniors who are now using their principle amounts instead of living off of interest ( They won't be able to hand down an inheritance to their children who will need it)
Equally, pension funds depend on a certain annual income to meet their present and future liabilities. Moreover, high interest rates provide investors with a cash flow, which can cushion downturns in asset values. The "real" spending power of households whose income depends on fixed interest securities will be cut and their standards of living will decline. After 2001, we had interest rates that were below both growth and cost-of-living increases and thus credit problems. But Wall Street loves it cause corporations can borrow money cheap here and expand overseas. A "Feel-Good" Payoff unfortunately for the Fed, its policies have been grand failures, either backfiring or even perniciously impoverishing the very Americans it claims to be helping.

1:03PM PDT on Aug 2, 2012

The Fed can't fix the problem Bernanky(?) made it clear the CONGRESS needs to act, and because the right has blocked everything they possibly can that would benefit Americans under Obama's Presidency, there has been are a lot of going back on what you originally agreed to. What happened to the huge investment our country was to make to modernize our crumbling & dangerous infrastructure? REPUBLICANS. Why was the U.S.'s credit rating downgraded? REPUBLICANS. WHY IS THERE A CLEARLY OBVIOUS WAR ON WOMEN? Republicans. Who has wasted so much time trying to stop any forward progress on Healthcare, with over 25 attempts to get it voted out? Republicans Who are so self-rightcheous as to continually promote an UnAmerican agenda denying basic civil rights with something as stupid as DOMA? Republicans. I can spend days listing just how corrupt, selfish, inhumane the Right is, but I'll just lobby for the Democratic Party like crazy and vote Democrat.

11:49AM PDT on Aug 2, 2012

Hmmm, I wonder if anyone recognizes that as the oligarchy increases the state of the world decreases. It's not the only affector but it works in line.

I guess as a species we're going to let things get really, really, really bad before we change anything and then it's going to be violent. Those in power do not surrender power easily no matter who it hurts. And their gluttonous consumption follows the same rule.

I hope Europe can save the Euro. It would be better for them. But I can't tell if it would be better for the world. Maybe it's 6 of one and half dozen of the other. As economies continue to breakdown while the wealthy glut eventually the correction will occur.

11:46AM PDT on Aug 2, 2012

When will they begin to audit the Fed as it was decided?

7:56AM PDT on Aug 2, 2012

The fed should use kristina......she seem to know it all!

7:55AM PDT on Aug 2, 2012

does the fed recognize that there can not be eternal unlimited economic growth and expansion and thus the related market corrections and contractions may be inevitable?

7:35AM PDT on Aug 2, 2012

The best thing the Federal Reserve can do is shut down.

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