The hopes of the markets are quickly dashed by the Central Bank of the United States. “I think the markets have an idea of some gigantic action coming, but I'm not sure if the data really calls for it. The probability is not that high." With these words the President of the St. Louis Federal Reserve, James Bullard, calmed the enthusiasm of investors, confident in the possibility of a new round of quantitative easing by the Institute.
The belief that the Fed could launch a new securities purchase program as early as next month had spread yesterday evening, after the publication of the minutes of the last Central Bank meeting (which was held between July 31st and August XNUMXst). The Fed's Open Market Committee had indicated the possibility of stimulus "quite soon" in the absence of improvements in the economy.
To reinforce the illusion they had arrived this afternoon negative data on new claims for unemployment benefits in the USA (increased by 4.000 units, compared with estimates that spoke of a reduction of 3.000 units). According to analysts, in these conditions, the unemployment rate will remain above 8%, a level that worries the Fed and which could push it to launch new stimulus measures.
In an interview with CNBC, however, Bullard defined the minutes “a bit outdated, because we've had some data since then that's been a little bit stronger." The slow pace with which the US economy is recovering would therefore be sufficient to justify massive action by the central bank and, if growth is at 2% for the rest of the year, the Fed will probably remain on the sidelines.
“We are only reacting to Europe – Bullard said again -, because its crisis is affecting the American economy. The direct effects of the European crisis are there, they are tangible, but they are relatively minor to the effects of a financial collapse”.
In any case, Bullard said to himself “pessimistic about Europe's ability to deal with the debt crisis“, due to a lack of sufficiently robust institutions, and said that the European Central Bank's plans to support individual countries risk politicizing monetary policy choices.
Bullard's words have pushed down the share pricesi, with Milan losing 1,4%.
