Fed to expand its bond buying programme

While the White House and congressional Republicans are still discussing a deal to prevent a so-called "fiscal cliff", the Federal Reserve was widely expected to announce a fresh round of quantitative easing during its Wednesday meeting in order to boost the flagging economy. The Fed extended stimulus through supplementary monthly $45 billion large purchases of Treasuries in addition to the existing $40 billion in mortgage debt purchases, as a part of Fed's QE3 programme. Earlier this year, the Fed pledged its readiness to inject cash into the economy until the labour market outlook improves substantially. However, the last data, which showed that jobless rate fell to 7.7% in November from 7.9% in the prior month, was mostly driven by the drop in the existing workforce.

"The Fed really has only one key decision at the meeting, and that is how much of the current program will they replace," said David Jones, chief economist at DMJ Advisors.