Fed Considers Ending Stimulus Program

federal-reserveEnding this program is a very good thing and a significant sign that  recovery is indeed under way. For a more detailed look at this subject – please read the article below.

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The Federal Reserve appears to be confident enough in the trajectory of the United States economy that it looks to be planning to stop adding to its bond holdings in October, according to the minutes of the June Federal Open Market Committee meeting.

The decision has been months in the making. Fed policymakers have tapered their government bond purchases in $10 billion increments at each Committee meeting since December, cutting them to $35 billion a month from $85 billion. At the current pace, the Fed would be buying $15 billion in Treasury bonds and mortgage-backed securities by its October meeting.

The purchases are intended to reduce borrowing costs for businesses and consumers and to encourage risk-taking by investors but have been the subject of some controversy as inflation concerns persist among some economists.

Economists at large have speculated that the Fed may reduce bond purchases by $15 billion instead of the customary $10 billion pattern that it has displayed so far.

Closing out the program would be of considerable symbolic significance to the financial markets and to the American public that the economy is now capable of standing on its own two feet and does not need the Fed’s stimulus funding to prop it up.

The symbolic reality is not lost on the Fed.

The policy makers agreed to communicate to the public later this year about the mechanisms that the Fed will use to bring up rates, as it is feared that bringing up the benchmark interest rate may not be enough because of the amount of cash in the system.

To read the complete article – please use the link below.

Ending Stimulus Program

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