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APPROPRIATE MONETARY POLICY
Low levels of Fed Funds Rate appropriate until late 2014
First increase not warranted until 2015
Prior to increase Committee to cease reinvesting some or all principal payments on securities in System Open Market Account
OTHER ARTICLES CNN on QE3 – $40 billion in mortgage-backed
securities each month.
Put downward pressure on LT interest rates
Republicans caution potential inflation
1st and 2nd QE fueled stock market gains –banks not eager to lend out money regularly
Banks sitting on $1.6 trillion in reserves
Fed Reserve selling shorter-term Treasury securities to buy Longer-term securities
Downward pressure on LT interest rates
To hopefully affect mortgages, corporate bonds, loans to households
May put upward pressure on Short-term yield
To provide additional stimulus
**Can this complicate exit strategy?
FRB MATURITY EXTENSION PROGRAM
THE FED RESERVES BALANCE SHEET
System Open Market Account (“SOMA”) portfolio
More than nearly tripled