Fed to re­view $600 bil­lion bond-buy­ing pro­gramme at meet­ing

The Pak Banker - - International3 -

WASHINGTON: Af­ter launch­ing a much-crit­i­cized $600 bil­lion bond-buy­ing pro­gram last month to bol­ster the econ­omy, the Fed­eral Re­serve is now tak­ing stock of how it's work­ing. Fed Chair­man Ben Ber­nanke and his col­leagues will gather Tues­day for their last sched­uled meet­ing of 2010, and no pol­icy changes are ex­pected. In­stead, Fed pol­i­cy­mak­ers will ex­am­ine the ef­fec­tive­ness of the un­fold­ing pro­gram and dis­cuss the im­pli­ca­tions of a tax-cut plan emerg­ing from Congress. Since the Fed an­nounced its sec­ond round of stim­u­lus on Nov. 3, stocks have risen. That's en­cour­ag­ing for the econ­omy be­cause larger stock port­fo­lios make peo­ple, es­pe­cially the wealthy, more in­clined to spend. On the other hand, rates on mort­gages have risen, de­fy­ing one of the Fed's stated goals of the bond-buy­ing pro­gram. The av­er­age rate on a 30-year fixed mort­gage has climbed to 4.61 per­cent. It's up sharply from 4.17 a month ago, the low­est rate in in some 40 years of record­keep­ing.

The Fed's de­ci­sion to buy $600 bil­lion worth of govern­ment bonds by the end of June is in­tended to spur Amer­i­cans to spend more, which would in­vig­o­rate the econ­omy.

Even sup­port­ers had cau­tioned that the ben­e­fits of the Fed's pro­gram would be mod­est. Even af­ter the Fed un­veiled it, Ber­nanke pressed Congress to in­ter­vene by pro­vid­ing the econ­omy with stim­u­lus. Ber­nanke warned that the Fed couldn't solve the econ­omy's prob­lems on its own. Crit­ics, from Repub­li­cans in Congress to some of­fi­cials within the Fed, have also said they fear the Fed's in­ter­ven­tion could spur in­fla­tion and spec­u­la­tive buy­ing on Wall Street while do­ing lit­tle to en­er­gize the econ­omy. -Ap

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