Faced with an economy that has been weakening since April and
economic forecasts that put GDP growth below 2% for the rest of the year
and well in to 2013, the Federal Reserve today announced its third round of “quantitative easing” in an effort to stimulate a seemingly inert economy:
WASHINGTON — The Federal Reserve opened a new chapter on Thursday in its efforts to stimulate the economy, announcing simply that it plans to buy mortgage bonds, and potentially other assets, until unemployment declines substantially.
The Fed said that it would expand its holdings of mortgage-backed securities and potentially take other steps to encourage borrowing and financial risk-taking. But perhaps more significant was the basic change in its approach: For the first time, the Fed pledged to act until the economy improved, rather than creating another program with a fixed endpoint.
In announcing the new policy, the Fed sought to make clear that its decision reflected not only an increased concern about the health of the economy, but an increased determination to respond – in effect, an acknowledgment that its approach until now had been flawed.
The Fed also acknowledged its limits. “Monetary policy, particularly in the current circumstances, cannot cure all economic ills,” the Fed chairman, Ben S. Bernanke, said at a news conference.
Read more: http://www.outsidethebeltway.com/federal-reserve-announces-another-round-of-stimulus-creating-money-out-of-thin-air/
WASHINGTON — The Federal Reserve opened a new chapter on Thursday in its efforts to stimulate the economy, announcing simply that it plans to buy mortgage bonds, and potentially other assets, until unemployment declines substantially.
The Fed said that it would expand its holdings of mortgage-backed securities and potentially take other steps to encourage borrowing and financial risk-taking. But perhaps more significant was the basic change in its approach: For the first time, the Fed pledged to act until the economy improved, rather than creating another program with a fixed endpoint.
In announcing the new policy, the Fed sought to make clear that its decision reflected not only an increased concern about the health of the economy, but an increased determination to respond – in effect, an acknowledgment that its approach until now had been flawed.
The Fed also acknowledged its limits. “Monetary policy, particularly in the current circumstances, cannot cure all economic ills,” the Fed chairman, Ben S. Bernanke, said at a news conference.
Read more: http://www.outsidethebeltway.com/federal-reserve-announces-another-round-of-stimulus-creating-money-out-of-thin-air/
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