Federal Reserve Trims Stimulus as Economy Rebounds After Nasty Winter

Federal Reserve Trims Stimulus as Economy Rebounds After Nasty Winter

Federal Reserve Trims Stimulus as Economy Rebounds After Nasty Winter

Contrary to what the right wing wants you to believe, the economy has rebounded under President Obama. The Federal Reserve’s latest press release proves that point — “growth in economic activity has rebounded in recent months.” The Fed cut its economic forecast for 2014, retreating from its stimulus activities. This latest news comes as applications for unemployment benefits fell to 312,000 last week, which is near pre-recession levels.

Labor market indicators generally showed further improvement. The unemployment rate, though lower, remains elevated. Household spending appears to be rising moderately and business fixed investment resumed its advance, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.

The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in July, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $15 billion per month rather than $20 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $20 billion per month rather than $25 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. The Committee’s sizable and still-increasing holdings of longer-term securities 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.

The big takeaway from this press release is that Fed Chair Janet Yellen isn’t giving up on the long-term and shadow unemployed. She admitted that “it’s conceivable there is some permanent damage” to the long-term unemployed but is still very optimistic that a faster recovery would get more people back into the labor force.


U.S. Economy Added 227K Jobs in February, Unemployment Rates Steady at 8.3%

Wall Street Journal:  The U.S. economy added 227,000 jobs in February, with the unemployment rate steady at 8.3% .

Reuters: “Employment grew solidly for a third straight month in February, a sign the economic recovery was broadening and in less need of further monetary stimulus from the Federal Reserve.”

U.S. Federal Reserve Joins Central Banks Worldwide to Rescue Europe, Sounds Like 2008 Debacle

U.S. Federal Reserve joins central banks worldwide take emergency action to keep European banks afloat, but isn’t this a repeat of the 2008 debacle?

Did the U.S. Federal Reserve just throw European banks a lifeline at the expense of working class Americans? This is a throwback to 2008 when we were saw the Bear Stearns collapse that sent shock waves throughout the financial markets, resulting in an economic crisis. I came across an interesting article on AmericaBlog about the little scheme of the Federal Reserve:

In essence, the US central bank, or Federal Reserve, agreed to provide cheaper dollar funding to the European Central Bank—which can then provide cheaper dollar loans to cash-strapped European banks.

The participation of the central banks of Canada, England, Japan and Switzerland is more of an effort to show that all the central bankers are working together than any expectation that there will be lots of dollar borrowings under their facility.

The goal is to ease the credit crunch in Europe. Lots of European banks make dollar denominated loans, in part because US interest rates are so low. The banks do not usually finance these loans in the way you might think—by lending out the deposits of their retail customers. Instead, the loans are financed by short-term borrowings from other financial institutions.

We bailed out the “too-big-to-fail” banks in 2008, who did little to help Main Street, and we are bailing out Europe, while unemployment claims continue to climb? Where’s the logic? We are coming to everyone’s rescue but that of our own people. Just Monday Deutsche Bank through its servicer Chase Bank tried to evict a 103 year old woman, Vinia Hall, from her Atlanta home because of a delinquent second mortgage. The central banks are stepping into dangerous territory again — extending cheap loans (practically free) to the banks to help them maintain liquidity so they can continue to function. Sounds like 2008 all over again. Please, share your thoughts….

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