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Fed expected to go Q-E free

Tuesday, October 28, 2014 - 01:42

The Fed begins its 2-day meeting, and is expected to enter a new post- quantitative easing phase. Bobbi Rebell reports.

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The Fed is going Q-E free. After finishing up its last scheduled Treasury bond purchase on Monday, look for the Fed to move past quantitative easing, and into a new phase, focusing on inflation, and finally, eventually, raising rates. IHS Global Insight Chief Financial Economist Paul Edelstein: SOUNDBITE: PAUL EDELSTEIN, CHIEF FINANCIAL ECONOMIST, IHS GLOBAL INSIGHT (ENGLISH) SAYING: The Fed really wants to get out of the business of Q-E. They did it a couple of years back to smooth out some risk factors in the economy, but there has been a lot of hand ringing about the program over the past year or so. They are worried about doing monetary policy with a big balance sheet. The Fed currently holds just over $4 trillion in treasuries and mortgage backed securities. They want to shift the emphasis of monetary policy back to interest rates and forward guidance." Edelstein doesn't see deflation as a real risk in the U.S., but the Fed will talk about the growing problems, and possible deflation in Europe: SOUNDBITE: PAUL EDELSTEIN, CHIEF FINANCIAL ECONOMIST, IHS GLOBAL INSIGHT (ENGLISH) SAYING: "I don't think that necessarily is going to come back to the U.S., but we have to be concerned about our trading partners about our counterparties in financial markets. The Fed is certainly going to take that under consideration." Also on the table: the financial markets here, not only the ultra low rates on treasuries, but also the roller coaster ride the stock market has been on. Standard and Poor's David Blitzer: SOUNDBITE: DAVID BLITZER, MANAGING DIRECTOR, STANDARD AND POOR'S (ENGLISH) SAYING: "I think the Fed will care about the volatility we've seen and the nervousness that we saw in the stock market over the last few weeks . I think that is a major concern of theirs." No press conference this time. The statement will be released at 2 pm eastern.

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Fed expected to go Q-E free

Tuesday, October 28, 2014 - 01:42