Our US Econ, Kevin Logan, expects the Fed to announce another unconventional policy move in its attempts to try and boost investor confidence. (Note that whilst the Fed meeting will start today, the decision or statement will not be released until tomorrow).
As per growing market expectations, we believe that the Fed will adopt the concept of ‘Operation Twist,’ by which it will extend the average maturity of its securities portfolio in an attempt to put downward pressure on longer-term interest rates. Other moves are possible, but we think that these are less likely. These moves include the lowering of the interest paid on excess bank reserves, or setting explicit economic targets that would motivate future policy action.
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HSBC Global Research