Week Ahead: Fed Expected to Launch New Program While Europe Debt Troubles Bubble

By Patti Domm
CNBC
Sep. 19, 2011

The Fed in the week ahead is widely expected to pull the trigger on a new easing program, as the European debt crisis continues to boil.

The housing market will also be a focus when new and existing home sales data is released Tuesday and Wednesday. New data this past week showed a jump in foreclosure starts, signaling that a big wave of foreclosed properties will hit the struggling housing market early next year.

The Dow and S&P 500 had their best week since July and second best week since July 2010, as European officials showed support for Greece. The Nasdaq did even better — jumping 6.3 percent, for its best week since July, 2009.

Market expectations are high that the Fed will announce a new program — dubbed "operation twist" — at the end of its two-day meeting Wednesday.

"Twist" is different than the much larger scale "QE2" quantitative easing program which involved the purchase of $600 billion in Treasury securities. Fed watchers expect this program to raise the duration of the securities the Fed holds, not the amount. The program, in theory, could reduce long-term interest rates as the Fed buys more securities in the middle and longer end of the yield curve.

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