Fed Says It Won't Ease Back on Quantitative Easing Just Yet

credit: trackrecord / Foter / CC BY-NC-NDcredit: trackrecord / Foter / CC BY-NC-NDWhen the Federal Reserve embarked on its latest round of quantitative easing (QE), it basically said that it would continue buying bonds until whenever it felt like stopping. The understanding was generally that bond-buying would continue until the economy looked like it was doing better, although the Fed didn't exactly say what "doing better" would look like. 

Lots of observers expected that the Fed would announce plans to ease off its bond-buying program today.

But it turns out that the Fed won't start tapering its QE program quite yet. The Federal Open Market Committee announced today that it would hold off on winding down its QE program, because the economy, while improved somewhat, is still too weak.

From the statement:

Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.

So when will the tapering begin? Eventually! (Probably.) "Asset purchases are not on a preset course," the statement says, "and the Committee's decisions about their pace will remain contingent on the Committee's economic outlook as well as its assessment of the likely efficacy and costs of such purchases."  

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  • The Late P Brooks||

    Seriously, I'll quit next week, but I'm under a lot of stress, you know?

    Gimme a hit.

  • Lord Humungus||

    so... forever? Or until the sun burns the earth into a little crisp.

  • Lady Bertrum||

    So, the doom and gloom chorus like Marc Faber and David Stockman were right. Both said the Fed would continue printing to infinity. So far, so good.

  • Paul.||

    The understanding was generally that bond-buying would continue until [morale improved]

    It's a good plan, really.

  • Brett L||

    The conditions aren't quite right for a true double dip recession... Keep it cranked open just a little more...

  • ChrisO||

    At least the devaluation of the Deutschmark in the Weimar Republic was done in an entertaining fashion. QE is so boring, by comparison.

    We probably won't even have the fun of wheelbarrows full of valueless currency or printed $20 million bills.

  • Paul.||

    We're an increasingly cashless society. I think it would be a soccer mom with a jogging stroller full of limitless credit cards...

  • BakedPenguin||

    $20 million? Hah.

  • Scruffy Nerfherder||

    inserts pinky in mouth

  • Pro Libertate||

    "Easings"

    Know it sounds funny,
    But I just can't stand the wane.
    Stocks, I'm boosting you tomorrow.
    Seems to me polls
    You know I've done all I can.
    You see, I begged, stole,
    And I borrowed.

    Ooh, that's why I'm easing,
    I'm easing 'spite expert warnings.
    That's why I'm easing.
    I'm easing 'spite expert warnings.

    Why in the world
    Would anybody put chains on me?
    I've paid my dues to make it.
    Everybody wants me to be
    What they want me to be.
    I'm so happy when I try to fake it.
    Yo!

    Ooh, that's why I'm easing,
    I'm easing 'spite expert warnings.
    That's why I'm easing.
    I'm easing 'spite expert warnings.

    I wanna be high, so high.
    I wanna be free of knowing
    The things I do bring blight.
    I wanna be free,
    Just me, babe!

    That's why I'm easing,
    I'm easing 'spite expert warnings.
    That's why I'm easing.
    I'm easing 'spite expert warnings.

    Because I'm easing,
    Easing 'spite expert warnings.
    Because I'm easing,
    Easing 'spite expert warnings.

  • BakedPenguin||

    Very nice.

  • Paul.||

    Don't encourage him.

  • Pro Libertate||

    Why do you hate black music, Paul?

  • Paul.||

    I only like black music. And you're RUINING IT! Well, Lionel Ritchie was black like Prince was black.

  • Pro Libertate||

    Have you ever played basketball against Prince?

  • Paul.||

    Dunked on his narrow white ass.

  • Paul.||

    When I trash talked him, I his nickname was 'Snowflake'.

  • Pro Libertate||

    Sure you did, Paul. Sure you did. Charlie Murphy has told us the truth.

  • Paul.||

    I hit his ass in the forehead with my Unity ring. He still got that shit imprinted...

  • Pro Libertate||

    Ah, this explains much--you're Rick James, bitch. I knew you faked your death.

  • Swiss Servator, Spare a Franc?||

    *Begins standing ovation, then remembers how much he detests Lionel Richie and sits back down*

  • Killazontherun||

    Related news that might be worth a pants shit:

    Gold Gone? Germany baffled as Fed bars access to bullion

    http://goo.gl/tq830Z

  • Warrren||

    Nice, the less trust in those fools the better.

  • gaijin||

    aaannnnddd...it's gone.

  • gaijin||

    Seriously. I suspect the request to repatriate gold, which was made at the beginning of this year, is one of the greatest under-reported stories of the year. The Fed basically said, 'no'. That's outright theft with no reasonable argument for the delay. Their shady banker friends need to keep the price in check to replace what they sold but never owned.

  • Raston Bot||

    Bernanke passing the buck... one last time.

  • Scruffy Nerfherder||

    His successor will be loathe to change course quickly, so I expect this to continue for a while yet. However, I'm still pushing my contractor to finish up so I can finance under the low interest rates while we still have them.

  • Mike M.||

    Dateline four weeks ago: New record: Federal Reserve owns more than $2 trillion in US debt.

    "The United States Federal Reserve has set a new record, but it’s not one exactly worth celebrating. For the first time ever, the Fed is carrying more than $2 trillion in US debt.

    According to the Fed’s latest weekly account, the central bank currently is holding roughly $2,001,093,000,000 in US Treasury securities.

    By comparison, the amount of federal debt held by the bank since the start of 2009 and the administration of US President Barack Obama has more than quadrupled. On Dec. 31, 2008 that statistic was less consisted of less than a half-trillion in Treasury securities, but efforts undertaken by the Fed to revive the economy — so called “quantitative easing” — have instead left the bank to bear record amounts of national debt.

    China, the second place holder with regards to US debt, was owed $1.2758 trillion by the US as of late June."

  • gaijin||

    time to whip up a platiunum coin.

  • Cytotoxic||

    This is totally insane. Time to buy BTC.

  • Swiss Servator, Spare a Franc?||

    Bachmann Turner Overdrive? Oh, wait BTC

  • Cytotoxic||

    So, what's the price of gold doing?

  • Paul.||

    Last I looked, going down, down, down. Still up from where it was a long, long time ago, but quite a ways down from its high during Recover Summer I.

  • R C Dean||

    Annnd, up a bunch this afternoon.

  • Paul.||

    Thank god... I have a mutual fund with a sizable position in gold...

  • Raston Bot||

    I suspect POTUS Rand will see 12% 30-year rates... and the joke will be on the Fed as a populist uprising calls for its abolishment.

  • Paul.||

    You mean Biden.

  • gaijin||

    Biden time

  • Mike M.||

    ROFLMAO.

  • R C Dean||

    Two things:

    (1) I had a stop loss on a small position in gold mining shares that got just barely triggered this morning, approximately an hour before the shares went vertical by 11%.

    (2) The market action makes it hard to argue that this market is driven by fundamentals rather than QE. The Fed did two things: (1) downgraded its outlook and (2) kept QE. A market following fundamentals would have tanked on the downgrade. A market floating on QE would have taken off. Guess which happened?

  • Paul.||

    After looking at my positions over the last few days, I'm still smiling. So far...

  • Mike M.||

    It's going to be hideous if and when the morphine drip does truly get unplugged from the body.

  • johnson29||

    Thank you for the post. We do sometimes get people who will ask us if we have heard much about reverse mortgages.

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