The Fed will release the minutes from its latest meeting this afternoon, and investors are closely watching for any hint of additional monetary easing measures.
However, analysts that were once hopeful of another round of quantitative easing are not expecting much action this time around given the recent improvement in economic data.
It might not feel like it, but we’re slowly—but surely—experiencing a steady recovery in the job market. The Labor Department announced that 163,000 new jobs were created in July, substantially above economists’ consensus estimate of 100,000 and the best monthly payroll job growth since February.
In addition, despite the "sky is falling" worries about impending inflation, prices have held steady since March—evidence that inflation is being kept in check. Over the summer, drops in energy costs have offset slightly higher food prices. While the severe drought in the Midwest threatens to push up supermarket prices later this year, in July the cost of food only increased 0.1%.
Jobs growth and keeping inflation in check is the Fed’s mandate, so as long as those two things are under control, we’re not likely to see any big actions come from today’s meeting. Many analysts are still expecting the Fed to make some kind of policy action at the mid-September meeting in Jackson Hole, but what exactly that’s going to be is still just speculation.
The most interesting option that the Fed has is a third major bond-buying program, which could be targeted towards buying mortgage-backed securities in an effort to stimulate the housing market.
I’ll be in touch if we see something unexpected from the Fed this afternoon, but I have a feeling that it’s going to be more of the same-old, same-old.