The US Federal Reserve is introducing another economic stimulus package to invigorate the struggling US economy. Through the Federal Open Market Committee’s policy statement the Fed announced Wednesday that it will buy 600-billion dollars of long-term treasury bonds by the middle of next year to drive down the historically low interest rate on mortgages and other forms of debt.
This is the second stimulus of its kind following the previous 1.7-trillion dollar bond purchase by the Fed in 2009. Officials say that the stimulus, known as the quantitative easing policy is designed to offer loans at a cheaper rate and thereby increase consumer spending which they hope will boost the employment rate and help avert deflation.
The move came as the Fed was put under pressure amid the staggering rates of economic growth and employment in the US. But some cast doubts on its effectiveness.
Bill Ford, Former Atlanta FED President said, "But now, they are in a new mode here and they are taking a lot of interest rate risks by doing this. I do not believe this is going to have any significant positive effect on either increasing the growth of GDP or reducing the unemployment rate."
On the question of whether it would expand its asset purchases beyond their initial plan the Fed gave no definite answer but instead stated that it will regularly review the pace of its securities purchases and the overall size of the asset-purchase programme.
Source: Arirang News