Fed Launches QE3Submitted by P.Au.L on Wed, 09/12/2012 - 08:02
WASHINGTON (MarketWatch) — The Federal Reserve, worried that improvement in the unemployment rate has stalled, announced a third, large purchase of bonds on Thursday in an effort to bring down long-term interest rates and spur growth.
The Fed said it would buy mortgage-backed securities at a pace of $40 billion per month.
The Federal Open Market Committee, which ended a two-day meeting on Thursday, said it was concerned that, without the action, “economic growth might not be strong enough to generate sustained improvement in labor market conditions.”Read text of statement.
Federal Reserve decision due 12:30 p.m. Thursday, followed by press conference
WASHINGTON (MarketWatch) — Fed watchers have little doubt the central bank is getting ready to launch what’s commonly called “QE3,” or a new large-scale asset purchase plan, but many think the countdown will be placed on hold until later this year.
“We don’t think the most likely outcome [in September] is going to be the announcement of another large scale asset-purchase plan. I am not convinced they are ready for it,” said Lewis Alexander, chief U.S. economist at Nomura Holdings.
“FOMC members continue to struggle with the appropriate structure for a future QE,” agreed Ward McCarthy, chief financial economist at Jefferies.
If this is the case, analysts said, headlines from the two-day meeting that ends Thursday will come from a less-aggressive step of altering language on a low-rate pledge. This will likely be extended until mid-2015. The current Fed pledge is to keep rates at “exceptionally low levels” through at least late 2014.
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