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The minutes of the Federal Open Market Committee’s September meeting come out today at 2PM, and everyone will be looking to see if the Federal Reserve has any more tools in its box to stimulate the economy in an uncertain global economy.Importantly, we’ll get a sense of internal divisions, giving us a sense of how much leeway Bernanke has to do whatever he wants.
While U.S. economic indicators have beat expectations during the last week, the deteriorating economic situation in Europe makes it difficult for investors and corporations to bank on continued optimism.
In September, Bernanke and his FOMC announced plans to embark on Operation Twist, which aims to lower long-term interest rates. Bernanke later admitted that he knew this program would have limited impact, but that it was nonetheless an important step taken towards securing the recovery.
If recent optimism is short-lived and the economy starts looking sour again, investors will want to see what the Fed will do next.
Here are a couple things we’ll be looking for from the minutes:
– In his testimony to the Joint Economic Committee in Congress, Bernanke said that increasing clarity in interest rate actions, cutting the Fed funds rate, and altering the way the Fed pays banks interest are all tools in the Fed’s basket. Today Dow Jones also reported that the Fed is considering a change in reserve requirements could cut bank costs and encourage lending. We’ll see if and how much any of these ideas were discussed.
– Bernanke said in his recent testimony, “There are no immediate plans for QE3,” but investors are not convinced. We’ll see if QE3 was brought up and if any members were fighting for it in the near-term.
– As in August, three committee members dissented from the policy decision in September. We’ll be looking to see if sentiment is turning more hawkish in general, or if it remains limited to the “Gang of Three”: Kocherlakota, Fisher, and Plosser.