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The weak US jobs report released today has boosted hopes that the Federal Reserve will provide more stimulus to the sluggish economy.
A weak US jobs report has fuelled expectations for the Federal Reserve to pump more money into the sluggish economy as early as next week.
The Federal Open Market Committee, which controls the levers on US monetary policy, will hold a two-day meeting on Wednesday and Thursday.
After the disappointing August jobs data, many investors are betting on the FOMC implementing another round of quantitative easing, which is when the Fed prints more money to buy government bonds and other securities from commercial banks.
This injection of liquidity into financial institutions is intended to lower interest rates and boost lending.
“Stocks are starting to get excited for further stimulus, as today’s job’s report may be just what the doctor ordered to push Ben Bernanke and the Federal Reserve closer toward QE3,” said Keith Springer, president of Springer Financial Advisors in Sacramento, California, told MarketWatch.
In his speech at Jackson Hole last week, Federal Reserve Chairman Ben Bernanke defended the previous round of quantitative easing, known as QE2, saying it had created more than two million jobs and boosted gross domestic product by three percent.
But he said employment in the United States remained “far from satisfactory”.
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Today’s jobs report is unlikely to change his view.
The Bureau of Labor Statistics said the United States added 96,000 jobs in August, 34,000 less than expected.
The unemployment rate fell from 8.3 percent to 8.1 percent, but this was because more people stopped looking for work, not because they found a job.
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