The US Federal Reserve raised hopes that it will act to boost the economy in September as it kept policy on hold but showed a strong bias towards further easing.
The rate-setting Federal Open Market Committee forecast that it will keep interest rates low until late 2014 –dashing market hopes that it might extend that date into 2015 –and did not launch a new round of quantitative easing, or QE3.
But in a sign that the FOMC is deeply concerned about the outlook, and keen to support growth, it issued a powerful new statement of its willingness to do more if the economy disappoints.
“The committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery,” said the FOMC’s statement.
If fiscal stimulus was added rather than monetary easing when demand is so weak. More easing becomes possible because Europe is also easing but that is more like having a race to the bottom than an actual solution. Granted, easing is better than doing nothing but it is more like kicking the can down the road than any kind of real, lasting solution.