Federal Reserve Will Keep the Stimulus Flowing
Posted at 12:45 p.m. on Nov. 29, 2012
Jon Hilsenrath looks ahead to the Federal Open Market Committee’s next policy-setting meeting on December 11-12, predicting that the Federal Reserve is set to continue and extend stimulative monetary policies into the new year.
“Since September the Fed has been buying $40 billion a month of mortgage-backed securities and looks set to continue that program.”
“The more urgent issue is what to do with a $45 billion-a-month program known as Operation Twist, in which the central bank is buying long-term Treasury securities and funding the purchases with sales of short-term Treasurys. That program ends in December… To keep buying the long-term bonds it would need to fund the purchases by creating new bank reserves, which in effect is printing money.”
“Reading economic data in the weeks ahead could be doubly hard, because of distortions caused by Sandy… Such variables could give the Fed added incentive to adopt a steady-as-she-goes approach on bond buying.”