The last FOMC meeting on June 19-20 was a disappointment for most people.  As the world tuned to hear about what the world’s largest and important Central Bank had in store for the United States, expectations had reached feverish levels.  Unfortunately for investors who expected action, the United States Federal Reserve did not feel that the economic conditions were bad enough for a new stimulus. The next FOMC meeting is scheduled on the 31^st of July and members are already making statements that are sure to build up a new round of expectations. The latest statement is by the President of Chicago Federal Reserve Bank, Charles Evans, who has advocated for “additional monetary accommodation” to help output. 

The Federal Reserve has kept short-term interest rates near zero and will do so until 2014, and since 2008 has also brought about two rounds of Quantitative easing, buying around $2.3 trillion in securities. Last month’s FOMC meeting concluded with extending Operation Twist by 6 more months. According to Evans, he would have “preferred an even stronger step” until unemployment fell below 7% and inflation reaches 3%. The past week has been a bad one for the U.S economy, with lower than predicted job growth and unemployment still high. Evans does not have voting power in the FOMC this year, but his views reflect a growing number of voices in the Federal Reserve and banks that want stronger action by the Central Bank.

With the latest string of bad economic data, the likelihood of a third round of Quantitative easing has grown. Economists at Wall-Street firms have put the likelihood of further monetary easing at around 70%. Evans argues that it is time that the Federal Reserve should enact policy that “tolerates a risk of inflation exceeding our target by as much as 1 percentage point”. Although the FOMC meeting is still a few weeks away, do expect more pressure of the Federal Reserve for more action. If Quantitative easing is enacted, it would certainly have more effect on the commodity market than any other singular event in the financial world.