As a little jolt to the stock market, the Federal Reserve today announced another round of quantitative easing (printing money) in an effort to reverse the rise in unemployment and encourage more home buying. This announcement arrives as the violence is still unfolding in Egypt and Libya among other Middle Eastern countries.
Report from The San Francisco Chronicle:
The Federal Reserve said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing as it seeks to boost growth and reduce unemployment.
“We’re looking for ongoing, sustained improvement in the labor market,” Chairman Ben S. Bernanke said in his press conference today in Washington following the conclusion of a two-day meeting of the Federal Open Market Committee. “There’s not a specific number we have in mind. What we’ve seen in the last six months isn’t it.”
Stocks jumped, sending benchmark indexes to the highest levels since 2007, as the Fed said it will continue buying assets, undertake additional purchases and employ other policy tools as appropriate “if the outlook for the labor market does not improve substantially.”
Bernanke is enlarging his supply of unconventional tools to attack unemployment stuck above 8 percent since February 2009, a situation he called a “grave concern.” The decision immediately provoked a renewed backlash from Republicans, including Senator Bob Corker of Tennessee, who said Bernanke’s policies damage the Fed’s credibility while doing little to spur the economy.
The Romney campaign condemned this new round if quantitative easing, report from MarketWatch:
Shortly after the Fed announced it would purchase $40 billion in mortgage-backed securities each month, Romney campaign policy director Lanhee Chen said in a press release: “The Federal Reserve’s announcement of a third round of quantitative easing is further confirmation that President Obama’s policies have not worked. After four years of stagnant growth, falling incomes, rising costs and persistently high unemployment, the American economy doesn’t need more artificial and ineffective measures. We should be creating wealth, not printing dollars.”
Most Americans are not paying attention to this type of dull economic news but this is the kind of under-the-radar story which has a great affect on our economy.