The uncertainty that is holding the US economy back may linger for some time, according to a Federal Reserve governor. In a speech in New Orleans, Susan Bies indicated that the Fed was still weighing up its plans for monetary policy owing to the uncertainty surrounding the war in Iraq. "War is a huge uncertainty. In a time of huge uncertainty, it is much harder to lay out a prospective plan about what you're going to do," she said. Following its last monetary policy meeting, the Fed admitted that geopolitical uncertainties had almost totally clouded the economic outlook and that it could not "usefully characterise the current balance of risks".
Based on the most recent accounts on the progress of the war in Iraq, Bies said she did not know for how long the uncertainty would hang over the economy, adding, "I don't think anybody is looking for a quick end to the uncertainty". But she said the Fed would be monitoring the economy closely and base its responses on what happens. "If we feel at any point that there is some action that needs to be taken, we will take it," she said. //www.fxcentre.com