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| The Fed chooses to continue its open-ended stimulus program |
Wednesday, September 18, 2013
The Fed Continues Stimulus
Reuters reported today that the Fed will continue to purchase bonds at a rate of $85 billion a month, due to concern about a rise in borrowing costs. Many financial markets were considering the opposite news - and thus the DOW is up over 100 points after a slow start to the day and the S&P has hit a record high.
Of course, the Federal Reserve has stated that they will continue to buy bonds as long as inflation is not an issue - and mention that while the economy is currently stabilizing, it is not growing. How much longer do you feel the Fed will continue to buy bonds at this rate - and what effect would stopping the stimulus have on the economy as a whole?
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Like any decision made by our government their is both an upside as well as a downside. In the short term this is excellent news for the stock market, of course they enjoying seeing the money flowing in; But on the other side this kind of says our economy isn't doing as well as we've perceived, which shouldn't be a shock to anyone seeing economic growth and job creation both remain sluggish.
ReplyDeleteAnother great example of monetary policy aimed at wider economic stimulus. The whole quantitative easing program seems aimed at giving banks more cash while the supposed effect of lower lending rates and greater liquidity in the market as a whole seems measured at best.
ReplyDeleteI think that this policy really aims to continue a stable economic recovery. By removing the stimulus at this point or in the close future, the government runs the risk of the market slipping back into the recession. I also wonder, with this fiscal cliff looming, what sort of cuts the fed will have to make and if those cuts will take a heavy toll on the perceived economic recovery.
ReplyDeleteCurrently economic stability is more important than anything else. Over the last couple of months we have seen fewer job loses and more job postings which is sign of potential growth. With this in mind the Fed probably not going to stop the stimulus anytime soon.
ReplyDeleteAs mentioned above this plan can work short term but raises issues for the future because of a lack of stability from the Stock Market
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