Looking Ahead to the Fed’s Meeting

There’s a lot going on this week. For one, Europe seems to have Mario Draghi’s back in his attempt to save the euro. This won’t be easy and honestly, they don’t have much time left. Draghi is meeting with Tim Geithner today in Germany. I’m not sure how much that will help him.

Wall Street is also waiting the big jobs report, which comes this Friday. This will be a biggie and I don’t expect much good news. Wall Street expects a gain of 85,000 for NFP. There could, however, be a surge due to pent up demand from earlier this year.

Before the jobs report, the Fed holds a two-day meeting on Tuesday and Wednesday of this week. Any new policy will be announced on Wednesday afternoon. The latest talk is that the Fed may cut the interest rate it pays banks on their reserves. Since they only pay 0.25%, I’m not sure how much of an impact this would have. Interestingly, Draghi did this same move in Europe a few weeks ago. The idea is that by stopping rewarding them to park their money at the Fed, banks will have to lend their money out to consumers and businesses who, in turn, will get the economy up off its back.

Another idea being kicked around is that the Fed will extend its forecast for low interest rates. Previously, the central bank said its rates would be staying low through 2014. They could slap another year on that and make it through 2015.

Posted by on July 30th, 2012 at 11:09 am


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