Wednesday, December 26, 2012

Federal Reserve leaning away from QE3

NEW YORK (CNNMoney) -- While the debate over "QE3" continues within the Federal Reserve, it seems more policymakers are leaning away from supporting further stimulus.

At the central bank's last policymaking meeting, Fed officials continued to discuss whether they should buy more assets in a third round of quantitative easing, commonly known as QE3.

But only "a couple" members were in favor of more stimulus, as opposed to two months earlier, when a "few" did so.

"A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate consistent rate of 2% over the medium run," minutes released Tuesday said.

The Fed's language on the overall economy also seemed more upbeat than in January, pointing to "encouraging" jobs data.

Since the financial crisis, the Fed has purchased $2.3 trillion in Treasuries and mortgage debt in the first two rounds of quantitative easing. The intent is that these policies will bring interest rates lower, boosting the economy by giving businesses and consumers access to cheaper credit.

Some members have recently indicated that by buying more mortgage backed securities, the Fed may be able to give a bigger boost to the struggling U.S. housing market.

Others have pointed to stronger jobs data as a sign that the economy is healing on its own, and may not need further assistance from the Fed.

Richmond Fed President Jeffrey Lacker was the only member of the central bank's 10-person Federal Open Market Committee voting against the use of language that specifies interest rates will likely remain low until the end of 2014.

He believes the economy will heat up enough to warrant a hike in interest rates before then. 

No comments:

Post a Comment