Minutes from the Federal Reserve’s meeting in August showed that central bank officials could be leaning toward enacting a new round of stimulus, perhaps even the much anticipated and speculated upon QE3. That is, of course, barring any substantial improvement to the economy. The Fed expressed concern over the sluggish GDP growth in the second quarter and continued weakness in the foreseeable future. This could sugguest that a new stimulus strategy could be unveiled in the Fed’s meeting later in September, or perhaps even at next week’s Jackson Hole meeting.
What is unclear, however, is whether the recent stronger-than-expected economic reports–which were released after the Fed’s meeting–are enough to sugguest that the economy does not need additional stimulus. Stocks, for their part, having been gradually melting upward in recent weeks, culminating in hitting their four-year highs earlier this week. At the very least, the improvements in housing, employment, and other key areas of data have taken some pressure off the Fed and Chairman Ben Bernanke to act sooner rather than later.
Yet, despite the recent rally in the market and signs of resiliency in the economy, investors are still racked with uncertainty as major headwinds continue to loom and threaten the stability of the markets. Globally, Europe and China remain as huge question marks. In the U.S., the lack of urgency displayed by Congress in dealing with the impending “fiscal cliff” has Wall Street worried about recession and the likelihood of more panic in the market.
For now at least, the Fed’s statements seem to be enough to keep hope alive for QE3, and that, in turn, may be enough to keep Wall Street calm for the time being.