http://www.forbes.com/sites/samanthasharf/2014/01/29/fed-to-further-trim-asset-purchases-to-65-billion/
Ben Bernanke, in his final meeting a chairman, announced that the Fed would continue tapering asset purchases. Bonds and treasury purchases are to be decreased due to recent economic expansion. The committee said that unemployment was higher than it would like, but household spending and business investment were accelerating. Growth could be higher but current fiscal policy was credited with underperformance. In June, Bernanke first announced plans to taper purchases which caused a 200 point drop in the Dow and caused investors to switch to more secure investments. Many were surprised to see the FED taking this action after seeing only 74,000 jobs added in December (compared to 200,000 in October and November)
It will be interesting to see what Janet Yellen does when she takes control as the new Chairman. It is known the Yellen is big on cutting unemployment and with these recent trends, I wouldn't be shocked if Yellen put more future focus on bringing down unemployment.
ReplyDeleteThe reduction in spending on OMOs seems to be a good sign. Although UR rate remains high inflation is still low but there is the potential for inflation to arise from the vast influx of money into the economy. This reduction can signal to companies that the Fed is starting to think about moving to more traditional measures of economic stability. This has the potential to add an additional spur in CAPEX, which is a good sign for a growing economy.
ReplyDeleteIt is interesting that Bernanke announced that there will be tapering of asset purchases by the Fed. It is also good to see that household spending and business investments are increasing. The Fed claims that unemployment is higher than they would like it to be. With this being said, I expect that Yellen will make unemployment one of her main focuses.
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