Credit Suisse expects the Federal Open Market Committee (FOMC) to vote next week for more policy accommodation. The most likely form this easing will take is an expansion of the Fed’s ongoing Operation Twist that was scheduled to conclude at the end of June.
When it meets on June 19-20 the FOMC will know the results of the June 17 Greek election and will have had a couple days to observe the markets’ reactions to that vote. Any Fed easing announcement should be incorporated in the FOMC statement to be released at 12:30PM ET on June 20.
Credit Suisse characterizes any Fed action next week as an exercise in risk management. That is, Fed officials will choose to lean against the downside risks to economic activity that has been intensifying since their April 24-25 meeting.
Recall, Fed Vice Chairman Janet Yellen said, "I am convinced that scope remains for the FOMC to provide further policy accommodation." Yellen adds, "There are a number of significant downside risks to the economic outlook, and hence it may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest."
With the next Fed meeting not until July 31-Aug. 1, this is it.
Futures’ July Market Watch column featuring Steve Beckner will be an online exclusive in which Steve analyzes the results of the June FOMC meeting. Watch for it at Futuresmag.com.