All Eyes On Bernanke: Will Fed Introduce New Stimulus?
We've told you about the mounting hints of new action by the Federal Reserve. The last was issued by Fed Chairman Ben Bernanke in Jackson Hole, Wy., two weeks ago.
Bernanke lamented the stagnant labor market and said the Fed remains ready to step in if needed.
Bernanke stopped just short of saying that during its next meeting, which happens today, the Fed's Open Markets Committee would announce a new round of economic stimulus.
So that's the big question before us today: Will the Federal Reserve announce a third round of quantitative easing? The Washington Post's Ezra Klein has a primer on what QE3 is. Essentially it's an unconventional monetary tool in which the Fed buys bonds or even mortgage-backed securities, which it hopes will bring down interest rates for mortgages and long-term loans.
The Los Angeles Times reports that this close to an election, the decision is fraught with politics:
"If the Fed announces another round of so-called quantitative easing, it also likely would give details about how much money it intends to spend on bonds and how it would spread that money among Treasury bonds, mortgage-backed securities and debt issued by government-backed agencies such as Fannie Mae.
"Expect political reaction to start rolling in shortly after the announcement, particularly from Republicans. Many of them have opposed the Fed's dramatic expansion of its balance sheet over the past four years and would be particularly upset about more stimulus action in the weeks before a presidential election."
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