Is there any chance for recession?
August 8, 2011
News Worldwide
While the employment Friday may reduce the urgency of a new round of the Fed’s help, a vision deteriorating economic environment and the actions form the other central banks, the central bank communicates much less optimistic about the political declaration and measures to a new stimulus.
There are several options that the Fed can stimulate the growth of: Changing the language in the declaration, by shifting the composition of the balance sheet is no longer the maturity, lowering the interest paid on the Reserve, an official of the inflation target, which clearly shows caps interest rates on longer-term Treasury debt (where the asset purchase of components), and outright purchases of bonds (ie QE3). Policy-makers are not likely to expand to more QE3 evidence is the presence of a recession lasting and inflation and inflation expectations moderated significantly. We expect that the Fed is approaching to take the first option was the August meeting.
Despite little influence on the outlook, it can help lift mood and lead to expectations of further easing in coming months.
U.S. ‘non-agricultural employment increased by 117 K in July. The private sector employment jumped by 154 K, but was partially offset by a decrease in temporary public employment. Unemployment unexpectedly slipped to 9.1% against 9.2% in June, but due to lower participation. Although the report had led the market higher, the effect was short lived as the global economic outlook remains bleak. After the market close, the S & P cut the rating of U.S. debt by one notch to AA + and maintained its outlook “negative” after the close of business on Friday. The agency said the downgrade reflects the fiscal consolidation plan was agreed earlier this month did not live up to what is needed to stabilize the dynamics of public debt in the medium term.
Economic growth in 2Q11 was weaker than expected. GDP grew 1.3% to an annual rate of 1.8% compared to the growth of the consensus, while the reading was revised lower than the 1Q11 from +0.4% +1.9%. Various financial institutions turned more pessimistic about the second half and reduced their forecasts for 2012 after the disappointing relationship. Now the central bank has a weight of temporary difficulties and factors that influence the steady recovery path. This certificate, before the Senate, July 13, Chairman Ben Bernanke said the weaker than expected recent economic performance has been influenced by temporary factors like the ‘rush of energy prices, particularly gasoline and food, “and “supply chain disruptions that occurred after the earthquake in Japan.
We expect the Fed to give tone of the post-meeting statement doves in the month of August. Report suggests that GDP growth was slower than the ‘modest pace’. We also expect the Fed to change the “long term” language Signal commitment to low interest rates. In addition, the funds, Fed policy makers may also be a sign that the central bank to maintain the balance between large for longer than previously expected.
Posted by Sid A · Filed Under World news
