Fed Maintains Low Rates and Bond Purchase Program

Nigel Thomas
30 Oct, 2013
New York City

Fed continued its program of monthly purchase of $85 billion of Treasury securities and mortgage-backed securities and left its low interest rate policy intact.

Investors shied away from stocks after the latest Fed statement offered no surprise and broader indexes trended lower.

As widely expected, Fed continued its program of monthly purchase of $85 billion of Treasury securities and mortgage-backed securities and left its low interest rate policy intact.

The statement noted that the housing market has softened in the second half after the rates began to rise but the Fed also offered a direct and unvarnished comment that “fiscal policy is restraining economic growth.”

Nine of the Fed’s policy committee of ten voting members voted in favor of the decision.

Esther L. George, the president of the Federal Reserve Bank of Kansas City voted against the measure, as she has done at every meeting this year George has been concerned about the higher inflation and Fed policy may destabilize financial markets.

The latest monthly inflation data, which tracks Fed’s preferred measure of inflation excluding food and fuel, declined 1.2% in August, below the 2% target set by the Fed.

However, inflation faced by most families and individual is significantly higher and most families face inflation between 6% and 8% as tracked by 123jump research team.

Fed’s measure conveniently ignores the higher inflation faced by most families and the current bond purchase program will eventually fan inflation fires that many economists worry political process and Fed will not be able to prevent.