Judgement day: the Fed chairman decides fate of US stimulus programme

An anxious waiting game.

The world stock markets are shaky as investors are cautious amid growing concerns that the US Federal Reserve may halt its favourite economic stimulus programme earlier than expected.

The US stocks opened lower this week, after reaching all-time highs last week. Now, financial media and analysts are putting the weak market down to a lack of economic security, after Fed officials suggested that the Federal Reserve might taper its bond buying programs.

Since September, the central bank has printed $85bn a month to purchase Treasuries and mortgage-backed securities, a policy known as quantitative easing. The programme’s life is contingent on the strength of the economy – the Fed is committed to ending it as soon as it detects substantial improvement in the outlook for US employment.

That said, it is no surprise that all eyes are on Fed Chairman Ben Bernanke, who is scheduled to give his testimony on the US economic outlook before Congress on Wednesday. The speech might give some hints about the Fed's exit strategy.

When the Fed’s 19-member policy committee last met three weeks ago, officials emphasised that they could either increase or decrease the scale of their monthly bond purchases, depending on projections for the economy.

In the weeks since, positive news on the US economy has outweighed the negative, thanks to a stronger jobs market, and growth in retail sales.

So it is no surprise that investors across the globe paid attention when Chicago Fed President Charles Evans, a voting member of the Federal Open Market Committee, the policy-setting arm of the Fed, last week expressed optimism over the US economy, raising concerns that he would support tapering the quantitative easing policy earlier than expected.

The US central bank's massive asset purchases are considered the main driver of US economic growth, so with the latest news that the stimulus programme might be halted or at best, that bond buying will decrease, investors are becoming wary. As the US dollar retreated against major currencies Monday, there’s no doubt that today’s testimony will have a serious impact on the American economy as well as global finances.

Consequently, today will be an anxious waiting game.

Fed Chairman Ben Bernanke. Photograph: Getty Images

Sandra Kilhof Nielsen is a freelance writer and former reporter for Retail Banker International, Cards International & Electronic Payments International.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.