Fed Set to Downgrade Outlook for U.S.?
August 9th, 2010Additionally, Bloomberg is running some chatter about the Fed possibly having to buy up more debt directly:
Gold may climb in London on increased demand for a protector of wealth as the dollar weakens and on speculation that the Federal Reserve will step up buying of bonds to prop up the U.S. economy.
Via: Financial Times:
Although Fed policymakers still believe the basic trajectory of the economy remains one of moderate expansion, there may be more attention given to heightened dangers of a sharp slowdown. “The FOMC will have to tone down its assessment of the economy in view of recent weak indicators on real growth, real consumption spending and employment,” said Brian Bethune and Nigel Gault, economists at Global Insight.
The latest poor reading came in Friday’s monthly employment report, which showed the US private sector creating only 71,000 jobs in July – not enough to keep up with population growth, let alone bring down the unemployment rate. That followed news a week earlier that growth in US gross domestic product slowed from an annualised rate of 3.7 per cent in the first quarter to 2.4 per cent in the second quarter.
“Given how low inflation already is, and given the potential for the recovery to falter, we expect Fed officials will highlight downside risks and signal a bias to ease in the FOMC statement,” said Jim O’Sullivan, chief economist at MF Global.
