FXstreet.com (Barcelona) - The FOMC starts its two-day meeting
and is considering several options for giving the economy a boost.
The most part of the media and banks research teams are doing their
bets on the Fed's decision that will be released on Wenesday. "
The fact that the Committee extended its current asset
purchase program, Operation Twist, at its last meeting in June
would present a substantial hurdle to launching another asset
purchase program (QE3 or sterilized purchases) this week
." Said Philip Marey, Senior US strategist at
. What's more, "the Committee may prefer to have some ammunition
left to offset the fiscal cliff, which will present itself at the
start of 2013. Therefore, we would probably have to see a further
deterioration in economic data or at least a prolonged episode of
the weak data that we are seeing now, before the Fed makes that
decision. However, the Fed does have other options that may offer
some support in the meantime. " He added.
On the other hand, Geoffrey Yu, FX strategist at
explained that the banks' economists have changed their view on Fed
policy and now
they expect a further easing programme in
. However, "our economists do not expect this to come in the form
of Large-Scale Asset Purchases (MBS or Treasurys). We now expect
the Fed to 'undertake an easing program within the discount window
facility', 'hich provides bank with access to even lower cost
funding - even at zero- to banks with certain lending or possible
debt forgiveness targets,'" he said. "Given the discount window is
collateralized, and any programme would be subject to restrictions,
the sense of 'debasement' is probably less palpable and markets
would need to find a new reaction function with respect to the
dollar. Given investors' recent tendency to reward policy
innovation, we do not expect immediate challenges to the dollar,
but are cognizant of the fact that this represents new territory
for the dollar itself and the market may take its time to factor in
the implications." He added.
FXstreet.com published it's own forecast for the Fed meeting. With
Fed's chairman Bernanke statement that he is "prepared to do more"
in mind, all the analysts polled by our editor's team preview that
the QE3 is at the gates. However, the most part agree that it's
unlikely to be in August, since
September 13th FOMC meeting seems a most factible