The Fed is gradually ending the expansion of its bond holdings, one
aspect of its economic stimulus campaign. It is widely expected to
announce on Wednesday that it will add $55 billion in Treasury and
mortgage-backed securities in April, down from $65 billion in March and
$85 billion each month last year. Fed officials say they intend to end
purchases in the fall unless the economic outlook changes sharply. Ultimately, the Fed believe that they have sufficiently stimulated the economy from increasing the supply of money, ending the bond holdings will reduce the money supply and in the long run the US dollar value will increase.
http://www.nytimes.com/2014/03/19/business/yellens-fed-will-sail-into-murkier-waters.html?ref=economy
http://www.nytimes.com/2014/03/19/business/yellens-fed-will-sail-into-murkier-waters.html?ref=economy
it's curious to note that through the FED believes that they have sufficiently stimulated the economy, many Americans believe that they are still not better off. The housing market and the lending market have made great comebacks since 2008. Housing prices are going up and it's a good thing but the stagnation of upward mobility in many middle class income Americans have not increased by much. It will be interesting to see how the FED with incentivize the public to now spend. Interest rates are near zero but that isn't sending the signal that they need.
ReplyDeleteI think this part of the article was interesting...
ReplyDelete“It’s a much tougher job to manage this committee than Bernanke had, because we’re at more of a transitional point,” said Julia Coronado, chief economist for North America at BNP Paribas, referring to Ben S. Bernanke, Ms. Yellen’s predecessor. “We’re not in a crisis, we’re kind of recovering to a degree — and then the question is, How much can monetary policy do?”
I think this is a very important time in our economy and I'm glad to see that we are recognizing this. It is very important that we make smart decisions now to ensure that we continue with this small growth.