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

Impact Of The Upcoming Fed Meeting, At A Glance

By The Associated Press

NEW YORK (AP) â¿¿ It's lifted stock prices, lowered borrowing rates, helped revive the economy â¿¿ and it may start winding down soon.

The Federal Reserve meets this week to decide whether to pull back from its extraordinary program of buying bonds designed to stimulate the economy.

Here's a look at the program and why you should care:

THE EVENT:

It's a two-day meeting starting Tuesday of the Federal Open Market Committee, a 12-member group that decides on central bank policy. The committee will likely decide to slow the central bank's policy of buying $85 billion of bonds each month. That buying has kept long-term borrowing rates at record lows.

THE BACKGROUND:

The low rates have helped revive the housing market, sent stocks soaring and helped the economy recover from its longest and deepest downturn since the Great Depression. The question now is whether the economy can continue to improve without the Fed's help.

THE DETAILS:

Many economists expect the Fed to slow its bond purchases by $10 billion a month, to $75 billion. The central bank is not expected to change its other key strategy for stimulating the economyâ¿¿ setting a short-term interest rate. It has said it will keep that rate near zero at least until the unemployment rate falls to 6.5 percent. Unemployment is 7.3 percent.

THE SIGNIFICANCE:

Some experts believe stock and bond markets may largely shrug off a Fed decision to slow bond purchases. Investors have had plenty of time to adjust their holdings. Fed Chairman Ben Bernanke has been suggesting a pullback was coming since May.

Bond investors have been selling in response, pushing down bond prices. The yield on 10-year Treasury notes, which moves in the opposite direction of their price, has nearly doubled to 2.89 percent.

One of the big impacts of a Fed pullback may have already largely taken place: Higher borrowing costs.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs