Fed Finally Ends Stimulus
The Federal Reserve
signaled confidence in the U.S. economy and relieved a few GOP
lawmakers Wednesday when it announced it will stop purchasing bonds to
stimulate the economy.
Since the 2008 financial crisis, the Fed has kept interest rates at
or near zero percent by purchasing bonds in an effort to reduce
unemployment and get the economy back on track. It's deemed the policy
of quantitative easing a success, and decided to end the program by November — a vote of confidence in the economy – reported The Wall Street Journal.
Texas Republican Rep. Kevin Brady, chairman of the Congressional Joint Economic Committee, said in a statement ending the unusual policy is the right decision. "Delaying the normalization of monetary policy offers few benefits and poses significant risks to the American economy," he said in a statement, but added it must be done carefully, in an "orderly and predictable" manner.
Some lawmakers acknowledge the unusual policy may have been necessary for a short time following the crisis, but has now created another bubble by artificially propping up the market for too long.
"In both time and money, QE has overstayed its welcome by years and by trillions," House Financial Services Committee Chairman Jeb Hensarling said in a statement Wednesday. "Loose monetary policy before the crisis inflated the housing bubble and six years of QE may have just inflated the next bubble."
The Fed indicated this decision was coming, so it's not surprising.
It's a vote of confidence in the economy, and the Fed assured markets
short-term interest rates should remain near zero for a "considerable
time," reported The WSJ.
But uncertainty about when and how much interest rates will rise has contributed to recent volatility in financial markets. In early October, the Dow Jones saw its worst single day drop of 2014. Sen. Rand Paul said at the time it could be a sign of a larger "correction" to come that would not make investors happy. (RELATED: Rand Paul Asks Poor Americans To Give Up On Dems)
Source
Texas Republican Rep. Kevin Brady, chairman of the Congressional Joint Economic Committee, said in a statement ending the unusual policy is the right decision. "Delaying the normalization of monetary policy offers few benefits and poses significant risks to the American economy," he said in a statement, but added it must be done carefully, in an "orderly and predictable" manner.
Some lawmakers acknowledge the unusual policy may have been necessary for a short time following the crisis, but has now created another bubble by artificially propping up the market for too long.
"In both time and money, QE has overstayed its welcome by years and by trillions," House Financial Services Committee Chairman Jeb Hensarling said in a statement Wednesday. "Loose monetary policy before the crisis inflated the housing bubble and six years of QE may have just inflated the next bubble."
But uncertainty about when and how much interest rates will rise has contributed to recent volatility in financial markets. In early October, the Dow Jones saw its worst single day drop of 2014. Sen. Rand Paul said at the time it could be a sign of a larger "correction" to come that would not make investors happy. (RELATED: Rand Paul Asks Poor Americans To Give Up On Dems)
Source
Read more at http://freedomoutpost.com/2014/10/fed-finally-ends-stimulus/#hVM0BpUFpJl1kJFS.99
