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Wednesday, September 18, 2013, 12:29 pm

Share your thoughts: The Fed correct not to “taper” bond-buying?

By The Associated Press

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    NBBJ Pulse Poll

    Did the Fed make the correct decision not to "taper" its bond-buying program?

    • Yes (48%, 11 votes)
    • No (48%, 11 votes)
    • Don't know (4%, 1 votes)

    Total voters: 23
    Polling period: September 18, 2013 @ 12:00 pm – September 25, 2013 @ 12:00 pm

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    Have more to say? Leave your comments below.

    WASHINGTON (AP) — The Federal Reserve has decided against reducing its stimulus for the U.S. economy, saying it will continue to buy $85 billion a month in bonds because it thinks the economy still needs the support.

    The Fed said in a statement Wednesday that it held off on tapering because it wants to see more conclusive evidence that the recovery will be sustained.

    Stocks spiked after the Fed released the statement at the end of its two-day policy meeting.

    In the statement, the Fed says that the economy is growing moderately and that some indicators of labor market conditions have shown improvement. But it noted that rising mortgage rates and government spending cuts are restraining growth.

    The bond purchases are intended to keep long-term loan rates low to spur borrowing and spending.

    The Fed also repeated that it plans to keep its key short-term interest rate near zero at least until unemployment falls to 6.5 percent, down from 7.3 percent last month. In the Fed’s most recent forecast, unemployment could reach that level as soon as late 2014.

    Many thought the Fed would scale back its purchases. But interest rates have jumped since May, when Fed Chairman Ben Bernanke first said the Fed might slow its bond buys later this year. But Bernanke cautioned that the reduction would hinge on the economy showing continued improvement.

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    Comments

    2 Comments

    1. September 18, 2013, 1:05 pm

      by Bob Dreyer

      Good. The modest rate of economic growth is a little more than stagnation and is not enough to significantly improve our lives. There is also no realistic expectation of significant inflation in the near future.
      Cheap money over the last year or two is about the only thing putting significant cash into the private economy. It has stabilized the banking industry, helped reduce the inventory of foreclosed homes in all neighborhoods, and put billions of dollars in the pockets of homeowners.
      What other government policy has been as effective at helping people and stimulating economic growth?


    2. September 19, 2013, 12:22 pm

      by Montgomery Taylor

      HOW LONG CAN THE FED KEEP RATES DOWN?… Consider what the Fed did last Wednesday. It refused to cut back on its bond buying program in an attempt to keep bond yields at historically (and artificially) low levels. The reason for doing that is the Fed doesn’t believe the unusually slow growing U.S. economy can withstand higher rates. And that reasoning pushed riskier assets sharply higher in a global celebration. That’s like a hospital patient celebrating when the doctor tells him he or she isn’t well enough to stop taking his medicine and go home. It’s nice to see the markets rallying which, of course, is our main interest. Sooner or later, however, it seems like the Fed is going to have to start letting bond yields take their normal course higher. The stock market may not like that immediately, but I believe that will benefit stocks in the long run. When bond yields do start to rise, and bond prices fall, some of that money will have to move into stocks. One of the side-effects of getting better is that you don’t need to keep taking medicine. That’s normally a good thing.


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