Following a two day meeting of the Federal Open Market Committee, it was decided to keep the monetary policy in the same direction with no earth-shattering changes. But Bernanke in the press conference kept the door open of an additional stimulus plan in the near future to help fight the high unemployment rate.
The FOMC stated in its statement that the economic progress of the US economy is still slow and the unemployment is likely to remain high. That being said, due to the higher than expected growth rate in US’s GDP in the third quarter (2.5% growth), the FOMC slightly revised upward its economic outlook on the US economy growth (US GDP) in 2011 and 2012.
Bernanke in the press conference stated that additional actions by the Federal Reserve to stimulate the economy and lower the unemployment rate is still on the table including a third round of purchasing LT securities or even extending the period of low interest rates, which is currently set to remain low until mid 2013.
If there will be an additional stimulus plan by the FOMC that will be more substantial than the last one, it could shake up the financial markets.
This news came in yesterday and helped pull up the American stock markets after they had fallen a day earlier over the news of a Greek referendum on the EU rescue plan. The major commodities prices such as crude oil and gold prices also bounced back yesterday, while the major currencies such as Euro, CAD and AUD slightly appreciated against the USD.
For further reading:
- FOMC Will Purchase LT Securities at $400 Billion – No QE3 for Now
- FOMC to keep rates low through mid-2013
- 5 reasons for QE3 and 3 against – opinion
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.