European Stimulus Supported by Federal Reserve

January 8th, 2015

The Federal Reserve released the meeting minutes of its Federal Open Market Committee (FOMC) meeting on December 16 and December 17, 2014.   In the wake of weak economic data out of Europe, the European Union (EU) has been increasingly vocal about its consideration of increased Quantitative Easing (QE) through purchases of asset backed securities (ABS) and covered bonds.  The European Central Bank (ECB) has also discussed extending purchases to corporate and sovereign debt.

Although not directly, members of the FOMC seemingly endorsed the increased stimulus currently under consideration.  In the minutes, member note the risks posed to the global economy if  “foreign policy responses were insufficient.” The minutes also state, “participants observed that movements in asset prices over the intermeeting period appeared to have been importantly influenced by concerns about prospects for foreign economic growth and by associated expectations of monetary policy actions in Europe.” The Federal Reserve comments will likely motivate European policymakers.

 

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