There has been quite a bit of coverage of Federal Reserve stimulus policy, which will ramp up again next week, in anticipation of the next meeting of the Federal Open Market Committee on Sept. 17-18, followed by the FOMC's policy statement. Many economists expect the central bank to make small reductions in its purchases of long-term mortgage-backed securities and U.S. Treasury bonds. These purchases have totaled $85 billion per month since last September, as the Fed has attempted to hold long-term rates down. The market in anticipation of a curtailment of bond purchases has sent the yield on 10-year Treasury bonds by 129 basis points since the end of April.
The yield on the 10-year bond rose sharply by 10 basis points on Thursday to 2.99% -- its
highest level in more than two years
But the Fed's main policy tool is the short-term federal funds rate, which has been kept in a range of zero to 0.25% since late 2008. The FOMC has said repeatedly said it will likely be appropriate to maintain its "extraordinarily accommodative" policy for short-term rates at least until the nation unemployment rate drops below 6.5%, making Friday's unemployment rate a critical number for investors.
-- Written by Philip van Doorn in Jupiter, Fla.