Q: Did the Federal Reserve make the right decision not to change policies at its meeting this week?

By: Dr.  Lynn Reaser
Ruckus 5
Yes.   The Federal Reserve needed this meeting to communicate to markets that a scaling back of asset purchases is now likely to take place by year-end if job growth continues at a sizable pace and there are further signs of an easing in unemployment.  Long-term interest rates have already moved up significantly (see link below).  An immediate “tapering” of purchases could have caused much more massive disruptions in stocks and bonds.  If the economy slowed again, the Fed would have been forced to ramp up asset purchases, causing disturbing volatility in monetary policy.  Investors and markets have been put on notice, which is enough for now.


Image Credit: http://www.nyse.com/press/1353065865878.html




Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s