Fed to end quantitative easing in October


Fed to end quantitative easing in October
  1. Fed to end quantitative easing in October
    advisor.ca
    The Federal Reserve says it will start in October to gradually unwind its US$4.5-trillion balance sheet, which expanded to unprecedented levels in efforts to spur economic growth after the 2008 financial crisis. The balance sheet primarily consists of government and mortgage-backed bonds. As the bonds mature, the Fed plans to spend less money each month…
    Finance

The Federal Reserve says it will start in October to gradually unwind its US$4.5-trillion balance sheet, which expanded to unprecedented levels in efforts to spur economic growth after the 2008 financial crisis.

The balance sheet primarily consists of government and mortgage-backed bonds. As the bonds mature, the Fed plans to spend less money each month to replace them, which reduces the balance sheet.

The U.S. central bank intends to spend US$10 billion less on bonds beginning next month, a figure that will eventually reach US$50 billion a month in October 2018.

No rate increase

Fed officials decided to keep their short-term benchmark rate between 1% and 1.25%. The Fed views the job market as strengthening, but it notes that inflation is running below its 2% annual target.

Still, the Fed said in a statement that prices for gasoline and other items might temporarily spike because of the damage caused by Hurricanes Harvey, Irma and Maria.

“Median forecasts beyond this year are little changed for both growth and inflation,” says Avery Shenfeld, director at CIBC Capital Markets, in a note. That’s “bullish for the [U.S. dollar] versus other majors [and] bearish for the bond market, as the Fed sticks to its guns for now.”

Federal Reserve policymakers say they still expect to hike short-term interest rates one more time this year and three times in 2018, if persistently low inflation rebounds.

They also have lowered their long-run forecast for the benchmark…

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