FINANCIAL TIMES: The US Federal Reserve has launched an open-ended effort to spark the recovery by injecting an additional $40bn into the economy each month through purchases of mortgage-backed securities.
Unlike previous programmes, the Fed’s third round of quantitative easing – nicknamed QE3 – does not have a defined limit and will continue until the labour market improves. Combined with its existing purchases of long-dated Treasuries under its Operation Twist programme, the Fed will be buying assets at a pace of $85bn a month for the rest of the year, a similar pace to its QE2 programme during 2010.
The Fed also extended its forecast that interest rates will remain “exceptionally low” from late 2014 until mid 2015, and indicated it might tolerate slightly higher inflation: “To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.” … (more)
EDITOR: An act of almost desperation. Businesses don’t borrow money because interest rates are low; they borrow so that they can use it to make money. It is fiscal, not monetary, stimulus to generate buyer demand that we need and the conservative wing of the Republican Party has thwarted ‘jobs bills’ in Congress.
