In a statement made this week regarding the Fed’s bond buying program, it was revealed that at this time they will continue to implement this program for at least another month. It was thought that the Fed would begin tapering this program beginning in September, which sent bond yields and mortgage rates soaring. After the announcement however, stocks rallied and bond yields fell.
The Fed has been buying $85 billion in bonds each month in order to lower long-term interest rates particularly on mortgages. This program, which is the third round of quantitative easing, is expected to begin tapering off later this year.
One of the key economic risks that the Fed is looking at to decide how it will proceed is Congress’ debate on budget and the debt ceiling. If Congress cannot agree, many functions of the federal government will be shut down indefinitely on October 1, 2013. They are also looking at unemployment figures and will continue to work toward the goal of keeping low interest rates in place until the unemployment rate falls to around 6.5%.
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