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08-10-2011 10:20 BJT Special Report:After S&P Downgrades U.S. Credit Rating |

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The downgrade of the U.S. credit rating by S&P has shocked global markets. The U.S. central bank's Federal Open Market Committee holds 8 regularly scheduled meetings throughout the year to discuss key decisions about interest rates and growth of the U.S. money supply. The latest meeting on Tuesday couldn't have come at a better time, when both traders and investors are looking to the Fed for some guidance.

Tuesday afternoon in New York City and the traders at Brown Brothers Harriman were in wait and see mode. A literal nail-biter moment- as they waited-staring at their screens, for the Fed's announcement after its policy-making meeting. As it came out, they read it carefully, assessing it and picking out the key points:

Rates will stay near zero for at least 2 more years- to mid 2013. But no indication of direct Fed action, although the Fed says it is prepared to do more if needed.

But the big concern- the economic outlook is getting worse.

The U.S. Federal Reserve, in an unprecedented move, said
on Tuesday it will keep interest rates near zero for at
least two more years, and consider further action. The
announcement bolstered battered stock markets.

"Economic growth so far this year has been considerably slower than the Committee had expected. Also recent labor indicators have been weaker than anticipated."

Marc Chandler, Global Head of Currency Strategy of Brown Brothers Harriman, said, "Their economic assessment was more sobering though. Recognizing the more recent weakness of the economy but this time not saying it's just temporary, recognizing that there are some more permanent or structural influences."

But by the end of the day that initial disappointment was overshadowed as buyers moved in to snatch up beaten-down stocks - creating a dramatic end of day rally for the markets.

The U.S. Federal Reserve, in an unprecedented move, said
on Tuesday it will keep interest rates near zero for at
least two more years, and consider further action. The
announcement bolstered battered stock markets.

Ted Weisberg, floor trader of Seaport Securities, said, "I think what you are having today is your basically having some bargain hunters trying to take advantage of what clearly is a very oversold, technically a very oversold stock market."

Also of note-the decision to keep the rock bottom interest rates in place until mid 2013 was not unanimous- there were three dissenters- for the first time since 1992, making it even harder for market watchers to figure out the Fed's next move.

 

Editor:Zhang Jingya |Source: CNTV.CN

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