Fed Policy 'Turned Financial Markets Into a Casino'

English: Janet Yellen being sworn in by Fed Chair Ben Bernanke (Photo credit: Wikipedia)

Hours from now the Fed will issue its long awaited decision on monetary policy. The big question for the financial markets: Will Fed officials decide in favor of a third round of quantitative easing, buying long-term government securities in order to reduce long-term rates to boost growth? Or will the Fed do something else entirely, or nothing at all?

Stocks rose moderately Tuesday in anticipation of Fed action and on Wednesday U.S. markets did just the same. If the Fed decides instead to stand pat, stocks are expected to retreat.

Fed Chairman Ben Bernanke's speech at the annual monetary meeting in Jackson Hole, Wyoming in late August is fueling the speculation of more QE.

"As we assess the benefits and costs of alternative policy approaches, though, we must not lose sight of the daunting economic challenges that confront our nation," Bernanke said. "The stagnation of the labor market in particular is a grave concern." A week later the latest jobs report provided more evidence of a continued weak labor market. The Labor Department reported that payrolls grew by only 96,000 in August, well below expectations, and that 368,000 Americans had left the labor force. That last bit of data reduced the unemployment rate to 8.1%, but not for any good reason.
In another sign of a slowing economy, the Institute for Supply Management last week reported the third straight month of declining manufacturing activity, and Fedex, operator of the world's largest cargo airline, cut its earnings forecast for the quarter ended August 31. ... Continue to read.

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• Bernanke Speaks: Fed Ready to Move, but Not Now (247wallst.com)