EDF Definitions

Approaching times of definitions for the EDF 11 August 2009 next Wednesday the Committee of monetary policy by the Federal Reserve of the United States (FED), will announce its decision on the monetary policy interest rate. Certainly does not generate many expectations on interest rate decision since its maintenance at current levels is deducted. However there are two issues that are of relevance to investors and that are related with the continuity of the program of buying government debt and corporate bonds and the Fed signals above as soon as more time may observe a change in monetary policy. The rough cut of rates together with the strong liquidity injections to limit the stresses in the financial system and assist the corporate sector in trouble alerted more conservatives on the risks that these actions can have in terms of inflationary pressures and creation of bubbles in asset prices. Is for this reason that in one of the many cuts, the Fed acknowledged the urgent need to reverse the downward rate cycle once the economy began to show signs of vitality. After two years of the crisis started, it seems that this time has come. A survey by Blue Chip Economic Indicators performed among economists in the private sector in USA showed that 90% of respondents believe that in the third quarter of this year will be declared the end of the recession in the United States.

The U.S. economy is starting to provide positive signals and this close to the Fed to take a decision which, as comment on the article yesterday, can result from spoilers. But despite the promises made, the behavior in the past of the reserve Federal shows that since 1970, the Fed has waited on average 14 months since the unemployment rate touched its peak, to begin with rates ascending cycle. When the last reading of the July unemployment rate showed a slight drop to 9.4 per cent of the economically active population, since the market not been interpreted as the beginning of a reversal in the dynamics of the rate unemployment already expected that the same continues to grow until the end of the year.