Wednesday, June 20, 2012

What will the Fed Do?-- Analysts Weigh In

From MarketBeat:

MarketBeat Mind Meld: Drink in the Collective Wall Street Wisdom!
...MarketBeat contracted wtih Mr. Spock to have him visit the various Wall Street shops to extract their expectations for the Fed today, via his well know mind-meld techniques. Here’s what he found.

Deutsche Bank: Our view for Wednesday’s FOMC statement is that at best we will get a soft Twist – smaller duration takeout, but not QE3. We think the Fed should be more aggressive, but Fed language does not suggest that they are there yet.

Goldman Sachs: Our confidence that the FOMC will ease policy once more at the June 19-20 meeting has also grown. At a time when Fed officials are far short of their dual mandate of maximum employment and 2% inflation, financial conditions should be accommodative and GDP growth should be well above trend in order to re-employ displaced workers and avoid a gradual transformation of cyclical into structural unemployment.

Barclays Capital: Markets have been treading water ahead of the FOMC decision. We expect an extension of Operation Twist but no further expansion of the Fed’s balance sheet. However, we expect the Fed’s economic projections and Chairman Bernanke’s press conference to have a dovish slant. This could lead to volatile prices. With some expectation of QE3 priced in, the decision could be a negative surprise to markets, resulting in a USD rally, but the press conference could then support risky asset prices, in our view. We recommend being long the USD ahead of the decision, but closing those positions before the press conference....