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Fed, ECB: actions louder than words

Monday, July 30, 2012 - 02:18

July 30 - Central banks have said a lot about their intention to step in as needed to boost economic growth, but actions could speak louder than words at their meetings later this week. Bobbi Rebell reports.

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It comes down to money and willpower: how far central banks are willing to go to pump more cash into economies, and jump start growth. In the U.S., the spotlight is on the Federal Reserve. Markets waiting to see what, if anything, they will do when they meet this week. Given the recent softer data, many investors are hoping to see signs that more will be done, especially given that fiscal stimulus is pretty much on hold ahead of the November election. UBS economist Sam Coffin: SOUNDBITE: SAM COFFIN, ECONOMIST, UBS (ENGLISH) SAYING: "It does create pressure on the Fed. I think that was one of the real reasons that they pushed the Operation Twist through the end of the year- to buy some support even in the presence of this uncertainty about fiscal policy that is clearly having some impact on U.S. consumers and businesses." But Coffin doesn't think the Fed will take action until its next meeting in September, arguing they will wait for more data. And in terms of investors- the Fed may be in a no-win situation. Michael Gayed is the Chief Investment Strategist at Pension Partners: SOUNDBITE: MICHAEL GAYED, CHIEF INVESTMENT STRATEGIST, PENSION PARTNERS (ENGLISH) SAYING: "It's a question of: has the expectation, the bar been set too high right? Can the Fed actually appease investors given these concerns about slowing growth and can the Fed really do much at all given yields which are already at panic low levels." As for Europe: After the European Central Bank President Mario Draghi's bold pledge to do whatever it takes to preserve the euro-,expectations are high for immediate action when the ECB meets later this week. SOUNDBITE: MICHAEL GAYED, CHIEF INVESTMENT STRATEGIST, PENSION PARTNERS (ENGLISH) SAYING: "Mario Draghi's back I think is very much against the wall. He is being seen now as effectively the savior for the entire euro zone because the fiscal players are really not acting as quickly as the market would like so we know that it is going to take a while for a fiscal compact to take place. We know that the most immediate way of preventing a collapse is through monetary action." In fact, a new Reuters poll showed 19 of 24 market traders expect the ECB to restart its bond buying program- and more than half of those expect it to be announced when they meet on Thursday. Bobbi Rebell, Reuters.

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Fed, ECB: actions louder than words

Monday, July 30, 2012 - 02:18