Much of the attention of the financial markets and media since the minutes of the July 31-August 1 meeting of the US Federal Reserve Board’s Federal Open Market Committee (FOMC) were released last week has focused on when and how the Fed will carry out the next stage of quantitative easing—the process through which the central banks pumps hundreds of billions of dollars into the money markets.
However, such is the myopia of the media as they direct their attention to the short-term fluctuations of the financial markets that the real significance and implications of the Fed’s deliberations are passed over in silence.
The focus of the media and financial markets on the Fed’s actions will become even more concentrated this week in the lead-up to the scheduled speech this Friday by Chairman Ben Bernanke to the annual gathering of central bankers at Jackson Hole, Wyoming. There will also be keen interest in the speech on Saturday by European Central Bank chief Mario Draghi, who has promised that the ECB will do “whatever it takes” to maintain the euro.
While the Fed chairman is not expected to announce a new round of quantitative easing in his speech, there is an expectation that action will soon be taken. The minutes of the FOMC noted: “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of economic recovery.”
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