“The most probable outcome of the FOMC meeting currently under way is the continuation of “Operation Twist” and possibly the extension of the current “exceptionally low… through late 2014” rateguidance to “mid 2015.”
Other policy changes are much less likely. A drop in the rate paid on bank reserves is possible but not preferable because it could destabilize money markets functioning (potentially pushing repo rates deep into negative territory with a sharp drop in liquidity). A UK style policy to lend to banks below market rates (to encourage lending) is also unlikely because of legal limitations and political ramifications of the Fed lending to banks again. And there is almost no chance that any sort of unsterilized asset purchases (QE3) will be announced.”
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