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Entries in QE2 (2)

Tuesday
Dec142010

Federal Reserve: Recovery Continuing, But Insufficient

Photo Courtesy - Getty Images(WASHINGTON) -- The Federal Reserve said Tuesday it will keep interest rates unchanged and continue its massive quantitative easing program.

The announcement after the one-day meeting of the central bank’s decision-making body marks the 17th in a row where the Open Market Committee decided to keep a key federal interest rate target unchanged at zero to 0.25 percent.

In November, the governors announced a $600 billion program, dubbed QE2, designed to stimulate spending by having the fed buy up Treasury bonds during the next eight months. The fed governors believed the additional money would lower borrowing costs for American consumers and businesses, but since the program was announced, interest rates have gone up slightly. The committee said they are going to continue the program, but will adjust the size and duration of the easing based on incoming data about the health of the economy as they originally planned.

The fed’s assessment of the overall economy continues to be tepid. Many analysts expect the Fed to keep  a steady hand over the next few months as they assess the effectiveness of their massive QE2 program and hope that recent good economic news continues to speed the recovery toward a more robust pace of growth.

The Dow pulled back slightly after the announcement.

The first meeting for the FOMC is scheduled for January 25 & 26.

Copyright 2010 ABC News Radio

Sunday
Oct312010

The Most Important Vote This Week: The Fed Meeting

Photo Courtesy - Getty Images(WASHINGTON) -- When Americans head to the polls on Tuesday, the Federal Reserve’s Open Market Committee will convene a two-day meeting in its historic Board Room. It is, arguably, in that room where the most important votes of the week will be cast – perhaps more impactful on the future of the Republic than the millions of individual ballots being cast around the country.

The economy is growing, but not at a pace where the mass of long-term unemployed and underemployed will see strong hiring in the near future. With a Democrat in the White House and the Republicans inevitably controlling one, if not two houses of Congress, gridlock is a certainty. It means another round of fiscal stimulus is unlikely, if not politically impossible.

The apolitical Federal Reserve might be one of the only parts of the Federal Government not bogged down in a political standstill after Tuesday’s election. To try to spark spending and hiring, they are planning an ambitious effort to spur economic recovery with an unprecedented effort called QE2 – “Quantitative Easing – 2nd Round.” QE techniques include buying up government bonds, mortgaged-backed securities, even commercial bonds issued by private companies and consumer lenders. It has the same effect of printing money without having to actually heat-up the presses.

The market believes the Fed will announce a program to buy up Treasury bonds a few $100 billion at a time over the next year. The buying program would likely be dependent on the Fed’s read of current economic conditions. If employment begins to ramp up, the Fed would likely not commit the full amount. If things deteriorate, the Fed could speed up the purchases.

Specific plans should be announced Wednesday.

Copyright 2010 ABC News Radio







ABC News Radio