Now, with unemployment stubbornly near 10 percent and showing no signs of going down soon, the Fed is contemplating a second, even bigger, round of debt purchases. One practical effect would be to lower 30-year mortgage rates even more than they have already fallen.
Friday, October 1, 2010
Official Hints at Fed Resuming Bond Purchases
The president of the New York Fed on Friday called for the Fed to resume large-scale purchases of long-term government bonds increasing the conviction that the central Bank will be continuing doing that throughout November. The president stated that the situation with trying to reach maximum possible employment and keeping price stability at the same time, is very unsatisfactory right now. The Fed has already held short-term interest rates at nearly zero since the end of 2008, however this didn't prove to be working. It also bought $1.7 trillion in long-term securities from January 2009 to March 2010 to put downward pressure on long-term rates.
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another problem with the keeping price stability low, relative to inflation, is that we are extremely close to hitting levels of deflation. There has also been talk of using a monetary policy to help get the economy rolling.
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