http://www.usatoday.com/story/money/business/2013/02/20/january-fed-minutes/1933047/
In this article, the Federal Reserve policy makers are expressing growing concerns that its easy-money policies could stoke inflation, which made investors fear that there was going to be an end to the economic stimulus. Currently, Fed policymakers are paying $85-billion a-month bond-buying program which is getting mixed reviews from the Fed policymakers. On one side of the table, if the Fed keeps buying bonds then they fear that inflation and market instability will increase, while on the other side of the table, the Fed are buying these securities to hold down long-term interest rates and encourage the purchasing of investments.
Paul Edelstein says, "that its likely that the Fed won't begin to scale back the bond purchases until unemployment, now 7.9%, falls to 7.5% next year." It is not exactly sure what will happen to the policy as there is still much groupthink to be had.
I believe the most important goal of the economy right now is to keep interest rates low, so the buying of homes, automobiles, and equipment will continue to increase and stimulate the economy.
Policymakers said these asset purchases could stoke eventual inflation or "undermine financial stability.", well it seems that this point may have been reached. Asset inflation in stocks, bonds, and commodities like oil. When these asset bubbles burst, what will happen? A complete financial crises.
ReplyDeleteI agree with you on the aspect the most important part our economy is to keep interest rates low in order to stimulate the economy. Although the rate of buying homes, automobiles, and equipment is slow, keeping the interest rates low will allow it to keep increasing which will only benefit our economy. Personally, I do not see the unemployment rate falling in the next year so I feel the policy will continue to take place.
ReplyDeleteThe Fed made a commitment to continue buying securities until unemployment falls to normal level. Interest rates have been very low but it did not reflect in a significant increase in consumption. The stock market on the other hand has been showing encouraging numbers. I think that the Fed is gambling with inflation level by pumping more money into the economy. Monetary policy seemed to run out of options and now it is fiscal's policy turn to step in with changes.
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