Shoot Ben Bernanke's bazooka. The Fed has announced a new round of quantitative easing: will buy $40 billion a month in mortgage-related securities and continue Operation Twist (to extend portfolio maturities) at least until the end of the year. The Central Bank, which has the cost of money left unchanged between 0 and 0,25%, he then announced that interest rates in the US will remain at at least exceptionally low levels until mid-2015, guidance that had previously been set at 2014.
Wall Street accelerates: the Dow Jones rose by 0,84% after the announcement (to the highest since 2007) and the Nasdaq by 1%. The S&P500 index gains 1% to its intraday highs since January 2008. Gold is inflamed, on fears of inflation, rising to 1.764,4 dollars an ounce.
After the enfilade of data worse than expected on the front of the American economy, especially on the employment front, Bernanke did not want to pass the "Draghi effect", which last week laid the foundations for a resolution of the European crisis (whose repercussions on the USA and China are crippling world recovery), and decided, as expected, for a another aggressive pro-growth stimulus programme. Buying bonds it will last until employment improves substantially.
And so, in a move likely to prove controversial, the Fed tied its unconventional bond-buying program directly to economic conditions taking the field with a more courageous intervention than many investors had already predicted. “If the labor market outlook does not improve substantially, the commission will continue its purchasing programme, implement additional asset purchases and use other available instruments until improvement is achieved in an environment of price stability ”, a Fed now increasingly concerned about the health of the economy said in its statement.
However, not all Americans will agree on a decision: many are wondering about the real effectiveness of a new unorthodox monetary policy move after the 2,3 trillion spent by the Central Bank to date according to critics have yielded modest results. Not so for Bernanke who he claims: we have saved 3 million jobs.
