Fed politics

12 September 2012 By Daniel Indiviglio

This week’s monetary policy move could have a bigger political than economic impact. Investors have factored in more easing, so inaction might ding Obama’s chances in November at the margins. But a big dose of juice will infuriate the GOP and further jeopardize Fed independence.

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The Federal Reserve’s monetary policy committee will conclude a two-day meeting on Sept 13. Economists overwhelmingly expect new action from the central bank, based on its August meeting minutes and comments by Chairman Ben Bernanke. These communications indicated that the Fed would add stimulus to the economy if employment growth continued to struggle.

In August, 96,000 more Americans found jobs, according to the Bureau of Labor Statistics. That result came in below expectations of around 125,000. The report also indicated that 368,000 workers left the labor market during the month.

About two-thirds of economists expect the Fed to announce a third bond-buying program as well as a language tweak to indicate that it will keep rates near zero into 2015, according to a Bloomberg survey.

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