Unfortunately for the US Fed, its two day meeting which wrapped up this morning won't have much influence on the outlook for the US economy: Friday night (Australian time), October jobs report will be a big sentiment shifter.

As will events in Europe and tonight's meeting of the European Central Bank.

That's not to say that the Fed's post meeting statement, new economic forecasts for the US and the post meeting news conference of chairman, Ben Bernanke, won't have some influence, they will.

Wall Street bounced after two days of falls closing up more than 1%.

That was after 2% gains in Europe where investors moved into a positive outlook about Greece, with a mini summit overnight between the leaders of Greece, France and Germany.

The Fed said that growth had strengthened somewhat in the third quarter but that "significant downside risks" remain.

Charles Evans, the president of the Chicago Fed, was the lone dissenter. He favored more easing.

All signs point to continued weakness in labor markets, the Fed said and it continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually."

The Fed was sanguine about the price outlook, saying that "inflation appears to have moderated since earlier this year" and will settle over coming quarters into the central bank's informal target range near 2%.

Fears about events in Europe saw markets across Asia down for a third day with the Australian market off 1% and 3.5% this week, but Hong Kong and China saw 1%-plus gains.

With events in Europe delicate ahead of the G20 leaders meeting tonight and tomorrow night in France, no one wants to disturb the chances of sanity returning to the eurozone and keeping the Greek bailout proposal alive.

So while the concentration will be on the US economy, the problems in Europe and a looming recession there will be the unspoken events for the Fed and analysts looking at the post meeting statements.

US economists say the 2.5% (annual) growth rate in the first estimate of third quarter growth has postponed talk of more stimulus from the Fed.

And a solid employment report tomorrow night will push any the chances of any new Fed move out into late 2012, if the economy remains sluggish.

The Fed updated economic forecasts, the first time since June.

In August, the Fed surprised analysts by saying that it anticipated that short-term rates would stay at zero until mid-2013.

This was the first time that the central bank has given such a commitment.

And then in September, the Fed revived a 1960s-era program called "Operation Twist" in which it will sell $US400 billion worth of short-maturity bonds it holds and reinvest in bonds maturing between 6 and 30 years by the end of June 2012.

The Fed has already purchased $US2.3 trillion in assets over the past three years to boost growth.

The Fed now has to wait until later this month, around Thanksgiving, for the report on the so-called Supercommittee that is looking at big cuts in US spending.

This process was agreed to in the dramatic early August agreement that averted a US government shutdown and possible default.

What it couldn't avoid is a credit rating downgrade which was delivered by Standard & Poor's.

Some US analysts reckon the chances of agreement on spending cuts by the end of this month is pretty rare and are factoring in more ratings downgrades and another political impasse.

The Fed has to keep this possibility in mind.

Copyright Australasian Investment Review.
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