Since the U.S. economic recovery began, the Federal Reserve has emerged as the biggest power player on Wall Street, with investors hanging on to every comment made by Fed Chairman Ben Bernanke and his team.
How powerful is the Fed? After recent comments from Bernanke that his agency might soon start to taper its easy-money policies over the next few months as the recovery continues, the stock market promptly went topsy-turvy, experiencing weeks of volatility that we hadn’t yet seen this year.
As such, investors are eagerly looking forward to this week’s two-day Federal Open Market Committee (FOMC) meeting, where they hope Bernanke will shed light on whether the Fed intends to begin scaling back its $85-billion-a-month bond-buying program, which has kept interest rates at record lows and helped to drive economic growth.
The Fed is now divided between hawkish members who think it’s time to cut back on the easy-money policies, and dovish ones like Bernanke, who believe the economic recovery is still too fragile to begin doing so.