August 26 2011

” No Country or Person Can Spend More Than They Have” -Raul Castro
Federal Reserve Will Decide Next Month on New Policy
Federal Reserve Chairman Ben Bernanke on Friday put off a lengthy discussion of the easing options available to the central bank until the next Federal Open Market Committee meeting late next month.  “The Fed has a range of tools that could be used to provide additional monetary stimulus,” Bernanke said. Bernanke announced that the Fed had decided to expand its September meeting to two days – Sept. 20 and 21 – to review the pros and cons of further easing.  At its policy meeting earlier this month, the Fed took the step of announcing that they expect the benchmark Federal funds rate to remain close to zero until at least mid-2013. Bernanke said the Fed had marked down its forecast over coming quarters but still expected “a moderate recovery” to continue and indeed strengthen over time. Bernanke also criticized Congress, saying the recent debate over the debt ceiling had hurt the economy. He called on Congress to not overlook the “fragility” of the economy in their efforts to bring the deficit under control. Making sure that fiscal policy does not hurt the economy and putting in place a sustainable long-term budget are not incompatible, he said. In his speech, Bernanke more clearly than ever before said the weak housing market was a big factor in the current disappointing recovery. He called for Congress and the White House to consider “good proactive housing policies” that could help speed the process of getting the sector on its feet. Bernanke had previously listed several tools to combat renewed downturn.  One option would be for the Fed to extend the duration of its holdings of market securities with an eye on pushing down long-term interest rates. Another step would be for the central bank to reduce the 0.25% interest paid on excess reserves to try to push banks to lend.  A third option would be to renew asset purchases, or quantitative easing in some form. Some experts advocate the Fed purchasing a small amount of assets every meeting instead of setting out a large amount at the outset.
The TSX closed at 12327, up 320 points or +2.67% over the past week.
The DOW closed at 11284, up 466 points or +4.31% over the past week.
The S&P closed at 1176, up 52 points or +4.63% over the past week.
The Nasdaq closed at 2479, up 137 points or +5.85% over the past week.
Gold closed at 1825, down 22 points or -1.19% over the past week.
Oil closed at 85.43, up +2.79 points or +3.26% over the past week.
The CAD/USD closed at 1.0184, up 0.0073 points or +0.16% over the past week.

Sources: Bloomberg Canada, Bank of Canada, Statistics Canada, Investment Executive