The Fed Doubles Down On Mistakes Despite Rampant Speculation

As expected, the Fed holds interest rates steady and announces it will continue QE.

Commitment to Blow Bubbles

The lead image is from Fed Holds Policy Steady as Economy Stumbles.

The Fed's Lovey-Dovey All-Around FOMC Statement shows the Fed's commitment to blow bubbles is still intact.

Eight Key Takeaways

  1. Whatever It Takes: Undertake open market operations as necessary to maintain the federal  funds rate in a target range of 0 to 1/4 percent.
  2. Full Range of Tools: The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.
  3. Accommodative Financial Conditions: Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. 
  4. Let Inflation Run Hot: With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. 
  5. No End Date to Accommodative Stance: The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.
  6. Pile on More QE:The Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.
  7. Roll Over QE Auction Proceeds: Roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and reinvest all principal payments from the Federal Reserve's holdings of agency debt and agency MBS in agency MBS.
  8. Set Low Primary Credit Rate: The Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 0.25 percent.
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