[video] Federal Reserve Announces Reduced Economic Stimulus
The video this transcript is based on appeared on December 18.
NEW YORK (TheStreet) -- The Federal Reserve moved to reduce its economic stimulus program after determining the U.S. economy is growing at a strong enough clip.
The Federal Reserve made its huge decision and said it will scale back its quantitative easing by 10 billion dollars a month, five billion in treasuries, five billion in mortgage-backed securities. Here to talk about what that means is Ben Garber, he's an economist at Moody's Analytics. Ben, thanks so much being for here.
Thanks for having me.
So, what's your take?
Look, the Fed saw strong data in jobs, a pickup in growth and they said now is the time to start unwinding this extraordinary stimulus, still keeping interest rates low in the long term but it's time to roll back this asset purchases.
So what does this mean moving forward, more tapering each month?
I think they will take a steady pace of tapering at each meeting, provided that the economic data holds up and inflation, which is still low, moves back up to the 2 percent target.
Were you surprised by the decision?
Not really, it was a very close call, it have gone either way but I think that, you know, they had set up the market for such an action, was not that much of a surprise and, you know, I think they're going to focus more
on put in their forward guidance for exceptional rates and let that take care for the heavy lifting for monetary policy .
Sure. What about the decision to scale back on mortgage-backed securities, I know you and a lot of other people saying maybe they'll just stick to treasuries if they do taper.
Yeah, I mean even in the statement they remarked on how housing had slowed a bit in recent months but at the same time because refinance activity dropped off so much, there'd be less mortgage-backed securities to buy over the next year or so so perhaps it make sense to scale back on mortgages as well.
We've seen so much good economic data we actually have a Fed taper, it almost sounds like a market returning to some sort of fundamentals.
Yeah I think we could see growth moving forward at a fast pace without the weight of extreme fiscal tightening. Perhaps homebuilding becomes a catalyst for growth towards 3 percent next year, so we're definitely seeing a move toward a normalized economy.
All right, Ben Garber, thanks so much.
For TheStreet, I'm Joe Deaux.
Written by Joe Deaux in New York.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV