Posted at 8:45 a.m. on March 19
As the Federal Open Market Committee meets to consider the economy’s progress and possible adjustments to monetary policy, Jon Hilsenrath notes that the Federal Reserve will likely be winding down its extraordinary measures for years to come.
“In the AFC era—’After Financial Crisis’—the Fed is working through a broader spectrum of interest rates. By using its bond portfolio and the messages it sends about future plans, the Fed is seeking to influence an array of long-term interest rates, mortgage rates and other borrowing costs that touch households, businesses and investors.”
“Economists surveyed by the Journal, on average, said they didn’t expect the Fed’s balance sheet to return to normal—not bloated with the many extra bonds purchased in its quantitative-easing programs—until December 2019… The Fed, by the economists’ estimation, could be operating in AFC mode for a long time.”
Meanwhile, Cullen Roche looks at new evidence that the effect of the latest round of quantitative easing has been “mostly psychological.”
