Markets  |  December 13, 2012 11:19:15

Fed will print money, Europe is moving to Union Bank

Monetary policy and the Fed's economic outlook

The U.S. central bank (Fed) announced yesterday that it will send the economy further monetary stimulus. Followed the ending "program Twist" and opted for regular buying Treasury bonds worth $ 45 billion a month. Also confirmed its intention to keep interest rates very low, at least until that will improve the situation on the labor market and inflation stabilization. Since their policy promises to reduce unemployment to 6.5 percent and inflation prospects over 2.5 percent.The bank admitted that the economic growth is willing to do almost anything, and if in the coming months there will be no improvement in the economic condition of the U.S. and is ready for further intervention.
"Operation Twist", which ends in December this year, was financed by the sale of short-term bonds. A new round of buying government bonds which the Fed announced yesterday, will be financed from the newly printed money. Fed has generally invested in the U.S. economy more than $ 2.8 trillion.
Fed voted on new steps in the proportion of 11-to-1 Only against the Richmond National Bank president Jeffrey Lacker, who has long opposed the purchase of bonds to the objectives of the Fed.
Ben Bernanke confirmed that the purchase of bonds will continue as long as it takes, and the program will end up in a situation where it will be possible to lift interest rates.
Despite the unconventional and aggressive efforts of the U.S. central bank U.S. economic growth remains tepid. GDP grew by 2.8 percent in the third quarter, but in the last quarter of this year is expected to drop to 1.2 percent.
Bernanke (Fed Chairman) yesterday also introduced the bank's economic outlook in 2015. Counts down the unemployment rate to 6.5 percent, and inflation, which is no more than 2 percent. GDP should wait for stronger expansion and growth between 2.3 - 3 percent.
Bernanke yesterday also expressed politicians and their struggle to budget. Indirectly, called for greater cooperation, because otherwise the country another recession. Fed chief sees the power of these political wrangles and said that the sentiment significantly affected mainly financial markets. The situation is likely to worsen with time waning.
Republicans sharply yesterday spoke against Barack Obama, which requires raising taxes. Republicans in the corridors did not conceal the fact that an agreement with the Democrats is still far away. John Boehner, the Republican boss, criticized Obama's concept. It's apparently just raising taxes without a deeper economic thought.

The European Summit

One bank to rule them all, or so it should look like in the next year in the eurozone. Today begins a two-day European Union summit in Brussels. The main theme remains the banking union, led by the European Central Bank (ECB). Germany turned its policy yesterday and told not to stand in the way of integration of the European banking.
After three years of debate, the opposition and struggle, we could not wait finally united union bank in the eurozone. This could be a starting block for further European integration, especially the creation of a fiscal union.The need for unification of the European banking system came to the surface when troubled banks in Ireland and Spain almost caused the collapse of local economy countries.
France and Germany a few weeks ago the biggest rivals in debates about "superbance" are now allies. German Finance Minister Wolfgang Schaeuble said yesterday that he feels a great chance to agreeing on the legal form a future banking system. "We are hoping for as much consensus, we have some comments and suggestions, but manages to find a compromise, so we will not stand in the way," added Schaeuble.
The ultimate question mark remains as to how to build a banking union other Member States such as the UK and Sweden. However, given the turnover in Germany is very likely that we end up anxious to sketch the basic functioning of the European Union's bank.

Eurodollars are moving all week in the growth channel, which could break last night after the publication of reports from America. Currently located in the correction wave and is preparing for further strengthening. The future of the euro is now in the hands of politicians who will act in Brussels today.

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