US Federal Reserve ends QE programme

The US Federal Reserve has said that it is ending its quantitative easing (QE) stimulus programme which it began in 2008.

US Federal Reserve ends QE programmeThe Fed said it was confident the US economic recovery would continue, despite a global economic slowdown as the targets for inflation and reduction in unemployment were on track, the Fed said in a statement.

The central bank, which also said it would not raise interest rates for a “considerable time”, has gradually cut back QE since last year.

The statement suggested that although the jobs market is strengthening, it is still not back to normal- which is why interest rates are being held.

“The Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability,” the Fed said.

Several analysts seized on the Fed’s comments about slack in the labour market. Previous policy statements have referred to “significant underutilization of labour resources”.

However Wednesday’s statement left out the word “significant”.

QE started in November 2008 amid the financial crisis and fears that the US, and the rest of the world, might be facing another great depression.

The Fed’s traditional ammunition, cutting interest rates, was running low – there was one more cut the following month, taking the main interest rate target down to practically zero.

So the central bank began buying financial assets and creating new money to pay for them.

In total, the Fed has added $3.7 trillion worth of assets to its holdings, about an eightfold increase.

Recent data has pointed to increase spending by consumers and businesses. However, the housing market is still struggling and pay is stagnant.

There is concern about the long-term impact of the US’s persistent low inflation, which risks undermining consumer spending as people delay purchases in the hope that prices will fall further.

October 30, 2014  Tags: , , , , , ,   Posted in: Business Finance, Business Growth, Business Win, Finance Business, Growing Business, Growing Businesses, Growing Economy, Uncategorized

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