Fed set to downgrade outlook for US

[sabra]

Source: FT

The Federal Reserve is set to downgrade its assessment of US economic prospects when it meets on Tuesday to discuss ways to reboot the flagging recovery.

Faced with weak economic data and rising fears of a double-dip recession, the Federal Open Market Committee is likely to ensure its policy is not constraining growth and to use its statement to signal greater concern about the economy. It is, however, unlikely to agree big new steps to boost growth.

Smaller measures to help the economy could initially take the form of a decision to reinvest proceeds from maturing mortgage-backed securities held by the US central bank, thereby preventing the Fed’s balance sheet from shrinking naturally.

Investors will also examine closely any changes to the pledge made by the FOMC in June to “employ its policy tools as necessary to promote economic recovery and price stability”, which could be hardened if policymakers choose to signal the potential for more aggressive move to boost the economy in the future.

But even if that happens, most economists believe that it would take several more months of poor data for the Fed to actually begin a new round of asset purchases on the scale of those carried out during the recession.

Read more: http://www.ft.com/cms/s/0/dedcb986-a316-11df-8cf4-00144feabdc0.html

[Skink]

1. Mortgage backed securities are the problem.

did they hire Greenspan as a consultant?

[TexasObserver]

2. Blame the jackasses who have pushed deficit reduction.

The GOP has done everything it can to undermine the recovery, which requires MORE, not less, deficit spending by the federal government. The drive to make deficit reduction an issue has only one purpose: to limit spending, which limits the recovery. The GOP never worried about the deficit when most of the national debt was created under Reagan, Bush I and Bush II.

We need massive new spending to help the recovery continue.

I expect the Fed to loosen the money supply the balance of the year.

[enlightenment]

5. I agree that the GOP pushes deficit reduction,

but the Dems are going to have to take responsibility for agreeing with them.

[SpiralHawk]

3. "Cloudy, with a chance of Republicon FAILballs" - Fed

[salib]

4. Wouldn't surprise me if right after the election

They change their toon.

I hate to be a "conspiracy theorist", but this is AWFULLY CONVENIENT for the same Fed who will now be "audited" to respond with a little "political payback" to all those Senators (not to mention Representatives, though that was a given) who voted to audit.

Jus' sayin'. It's right there!