| Comment on the Fed announcement on interest rates |
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| Written by Gary Howes | |
| Thursday, 13 August 2009 09:30 | |
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"The consumer is bruised and battered following the collapse in employment..." Dave Chappell, Fixed income fund manager and US bonds specialist at Threadneedle comments: “The statement continues to indicate that the Fed funds rate will remain at exceptionally low levels for an extended period. “The economy is appearing to find a base at a low level. The possibility of a 'V' shaped recovery continues to be remote in my opinion. The consumer is bruised and battered following the collapse in employment, and with it wages, housing and stocks. A quarter of a million job losses reported on Friday was cheered as further evidence of a turn around, but the facts remain the same - the over leveraged consumer has a long, painful path to a cleansed balance sheet, and that means the major player in US GDP will remain sluggish over the coming quarters. Recent downward revisions to wage data also indicate that pressures on inflation are firmly to the downside. “The Fed purchase program of MBS (Mortgage Backed Securities) and Agency purchases remains the same. The $300bn Treasury purchase program stays the same in size, but will be stretched out for another month to the end of October. This will allow the Fed to further watch the economy, while keeping its options open.” 
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| Last Updated ( Thursday, 13 August 2009 09:33 ) |