FOMC preview: countdown to more of the same, probably

Posted by Cardiff Garcia on Jun 20 20:51.

We plan to pummel you with unrelenting promotion remind you once or twice more before Wednesday, but we’ll be hosting a Markets Live session during Bernanke’s press conference after the FOMC meeting.

Despite the many obvious signs of slowing growth since the FOMC last met in April, we’re not expecting any bold new announcements from this meeting.

But if you’re looking for a preview, you could do worse than the latest analysis out of Credit Suisse:

• If Federal Reserve officials were hoping their $600bn large-scale asset purchase program (LSAP or ““QE2””) would glide tranquilly to its June 30 conclusion, they may be disappointed. Turbulence emanating from various sources threatens to complicate monetary policy navigation.

• But for now, the most likely scenario is that the Fed finishes its Treasury purchases as planned and then moves into an uncomfortable policy holding pattern for the balance of the year.

• Members of the Federal Open Market Committee will gather on June 21-22 amid a notable slowdown in domestic economic activity, resurgent concerns about the Eurozone periphery, and an impasse in government debt ceiling negotiations. The skies are also clouded by accelerating core inflation rates.

• Against this backdrop, Chairman Bernanke will conduct a press briefing following the committee’’s two-day meeting. We expect the tone of the FOMC policy statement and Bernanke’’s prepared text to resemble that of the chairman’’s June 7 speech in Atlanta on the US economic outlook.

• In that address, Bernanke acknowledged the weakness of the recent US economic data but suggested the soft patch will prove to be transitory. He also strongly implied that neither a new stimulus program nor a near-term tightening move is on the table.

• We anticipate the bottom line on June 22 will be similar and expect the FOMC to continue signaling ““exceptionally low levels for the federal funds rate for an extended period.”

Full report in the usual place.

Related link:
The dollar-battering Bernanke presser – FT Alphaville

This entry was posted by Cardiff Garcia on Monday, June 20th, 2011 at 20:51 and is filed under Capital markets. Tagged with , .

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