A new day emerges dear reader with little fundamentals released from the world’s leading economy, while investor’s attention will be focused on the Federal Reserve, as it will release its decision on interest rates, which is expected to be preserved at record lows between 0.0% - 0.25%.
The Federal Reserve officials will surely note in the statement that accompanies decisions; that economical conditions have improved over the course of this quarter gradually, which was seen throughout the past months and that’s why analysts started to project a growth rate for this quarter, which reaches 2.9 percent from the second quarter contraction of 1.0 percent.
Fed pledged previously that it will work on improving and delivering recovery in a short period of time, along with preserving interest rates at record lows, but with continued threats to the economy from high unemployment rates and the constrains put in front of the economical recovery by tight credit condition; will keep investor’s speculating when fed's will risk raising the interest rates later on this year with such conditions.
Therefore, the Feds will try to ensure investors a gradual recovery will come, being subdued off course over the upcoming period; therefore, we should expect that rates starting climb at the end of the fourth quarter of the year or early on the first quarter of 2010.
Fed’s Chairman Ben Bernanke previously stated that he sees, that the worst recession since the Great Depression, has finally ended for the U.S; whereas, conditions started to improve on a noticeable base by the second half of this year but debates will persist between officials on high unemployment rates, along with tight credit conditions that continue to hammer down on consumer spending, not to mention the Fed’s policy of purchasing treasuries.
The Federal Reserve stated that the program of purchasing treasury securities will be halted in October, while the Open Committee will surely discuss on whether they should extend their purchases of more than $1.4 Trillion in the housing and emergency programs till 2010 or start implementing the previously mentioned tools to withdraw excessive amounts of liquidity from markets that was stated in the last FOMC Minutes report.
Officials will also discuss whether to expand their support to purchase more MBS to $1.25 trillion, along with the $200 billion agency debt by the end of this year; along with finding the proper ways to narrow down the huge budget deficit that continues to threaten the U.S economy.
The U.S economy continues to emerge back, to take its place as the strongest economy on earth, after economical conditions improved in a gradual base but we are still on an early stage from recovery. However, investor’s will look for brighter signs from the Fed’s to start building a solid economical recovery, from there or the U.S will continue to suffer from the credit crunch for another quarter.
