Wednesday, October 29, 2014

Federal Reserve Announces End To Quantitative Easing

The Fed announced today that it would end its purchase of treasuries and mortgage securities.  It concluded that the economy had recovered sufficiently and that inflation was close to its 2% target.  This article provides a good overview of quantitative easing and what it accomplished.  It kept the interest rate on mortgages low and that helped to keep the housing market afloat.  It also made it less expensive for corporations and households to lower the cost of debt service.  The economy has had a moderate recovery but it still operates below its potential.  Job creation has improved but not as much as most would have liked.  The biggest winners from the program may have been holders of corporate stock.  The PE ratio is not as high as it was during the dotcom boom but it is high relative to historical averages.

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