This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fed Is Expected To Maintain Stimulative Programs

The brighter news has prompted speculation that the Fed might be preparing to dial back its easy-money policies. Such thinking has been fed by concerns voiced by a few Fed regional bank presidents about the low-rate policies.

These include fears that the Fed has pumped so much money into the economy that it could eventually ignite inflation, fuel speculative asset bubbles or destabilize markets once the Fed has to start raising rates or unloading its record $3 trillion investment portfolio.

Minutes of the December and January policy meetings showed that some officials suggested that the Fed might need to at least scale back its $85 billion-a-month in bond purchases. Still, the low-rate policies received solid backing in 11-1 votes. And economists see no sign that this support is eroding.

When he gave the Fed's twice-a-year economic report to Congress in February, Bernanke defended the low-interest rate programs. And while he acknowledged the fears of critics, he downplayed them. He struck the same note in a speech to a conference in San Francisco. There, Bernanke said it would be "quite costly" to the U.S. economy if the Fed pulled back too soon.

At their last meeting Jan. 28-29, Fed officials reaffirmed their decision in December to keep short-term rates at super-lows at least as long as unemployment stays above 6.5 percent. The Fed's benchmark rate for overnight bank lending has remained at a record low near zero since December 2008. The Fed also repeated its plan to keep buying bonds to lower long-term rates until the job market had improved "substantially."

One reason for the Fed's reluctance to reduce its stimulus is the history of the past three years. In each of the three, economic prospects looked promising as the year began. Yet in each case, the economy stumbled.

In 2010, U.S. growth was hurt by turmoil from Europe's debt crisis. In 2011, a spike in gas prices and supply disruptions caused by Japan's earthquake and tsunami dampened growth. And in 2012, higher gas prices cut into consumer spending.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs