US Fed to End Stimulus in October
Surely a sign that the American economy is once again out of the doldrums and on an up-turn is that the US Federal Reserve (The Fed) is looking to end its stimulus programme in October.
The Fed had been pursuing a policy of quantitive easing by buying up billions of dollars of bonds in an effort to keep long-term interest rates low and thus boost spending. However, it would appear that the US economy has bounced back and is building up some serious momentum in re-establishing the country as the dominant global economic force that it is meaning that it no longer needs the extra support from the nation’s central bank.
This is great news for investors who now see the country as a safe bet to put money into but they now wait on an announcement as to when the Fed will raise its short term interest rate which has been held at zero since 2008.
It has not gone unnoticed that the Fed has said that it will raise interest rates once a “considerable time” has passed after its stimulus programme ends in October. The vagueness of the statement has been cause for concern for many who are looking to jump back into investing in the American economy as soon as is viable for them and In a press conference, Fed chairwoman Janet Yellen disappointed some when she said there was no “calendar date” for a rate rise.
However, she did go on to say:
“As I have said repeatedly, the decisions that the committee makes about what is the appropriate time to begin to raise its target for the federal funds rate will be data dependent,”
“If the events surprise us and we are moving more quickly toward our objectives and the committee sees a need to move sooner, or later depending on what the data is… I do feel we have the flexibility to move,”
“It is important for markets to understand that there is uncertainty and the statement is not some sort of firm promise about a particular amount of time.”
These statements were followed by information that there has been a drop in prices. Prices fell 0.2% in August from July, their first decline in more than a year, and annual inflation is currently at 1.7% – well below the Fed’s target. Many investors will be keeping a keen eye on the Fed’s statements over the coming weeks and months, trying to decide when is the best time to once again throw their money into America.