It's unlikely the Fed will introduce another round of quantitative easing, say some observers
Susan Walsh / AP
The Dow fell by 635 points, Asia followed suit and Europe is expecting losses for up to 6 percent following the downgrade of US debt by ratings agency Standard & Poor’s. Whether the move by S&P can be wholly blamed for the heavy selling of stocks is open to question, but the market is now asking how the Fed will react when it meets today to discuss its response at its monthly meeting.
Last month, Federal Reserve Chairman Ben Bernanke outlined four actions he could take: More quantitative easing; cutting interest on excess reserves; buying longer-dated bonds, or giving guidance on when he will begin to shrink the Fed’s balance sheet. All options open to the Fed chairman, and following the huge losses for stocks since late last week, the Federal Open Market Committee will on Tuesday have to take all options very seriously.