The U.S. Federal Reserve could announce a new program of asset purchases to support a weak economy as early as November, according to Goldman Sachs Group Inc.
"We don't expect this at the Sept. 21 meeting, but in November or December there's certainly a possibility that it will be announced," Jan Hatzius, chief economist at the bank, said Tuesday. He added the Fed is likely to buy U.S. Treasurys worth around $1.0 trillion to kick-start the economy.
Goldman Sachs expects this to happen soon given the weakness in the U.S. economy as a result of lower business inventory accumulation and a fading fiscal stimulus. The bank expects the U.S. unemployment rate to creep back up to 10% by early 2011 from 9.6% in August and to stay around that level for most of the year.
U.S. inflation is predicted to continue slowing to 0.5% by the end of next year from around 1.0% currently. That would be well below the Fed's informal target of between 1.5% and 2.0%.
The protracted weakness in the U.S. economy should keep the Fed's short-term interest rate close to zero at least through 2012--and "quite possibly longer than that," Hatzius said.Could not agree more with Mr. Hatzius on the last point regarding interest rates. Get used to ZIRP forever courtesy of Zimbabwe Ben. ZIRP is a policy which illegally redistributes hundreds of billions of dollars from honest savers to corrupt banks. If the Fed continues its kamikaze policies I may have to put 100% of my portfolio in gold. I really hope Goldman is wrong on this call.
Black Swan Insights
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The worst thing the federal reserrve can do is print money.
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