Wednesday, July 13, 2011

JPMorgan Chase: division of opinions within the Fed

The minutes of FOMC June 21-22 meeting released yesterday showed that there’s the disagreement within the Federal Reserve on the necessity of further monetary stimulus.

It happens that some members of the Federal Open Market Committee believe that the central bank might have to consider the possibility of launching additional quantitative easing measures, especially if economic growth remains weak and insufficient to reduce the unemployment rate in the medium term.  

A number of other FOMC members, on the contrary, think that as inflation risks increase it may mean that the economic conditions are likely to improve so that the Fed will be able to normalize its policy even earlier than projected now.

Analysts at JPMorgan Chase note that one camp is worried about what happens if growth slows more than expected, while the other – about what happens if the rise in inflation isn’t transitory. So, the policymakers think that they can’t ease monetary policy because inflation is rising nor tighten it as the unemployment rate is too high.

As a result, the Federal Reserve is likely to wait watching the economic developments and keeping the rates at the record minimum. Economists surveyed by Bloomberg News, that the rates in the United States will remain between 0 and 0.25% until the second quarter of 2012.

writed by FBS Holdings © 2011