Paper Chase: Fed Decides Against Tapering


Fed Chair Ben Bernanke said the Fed would await evidence of a more stable economy before adjusting the pace of its asset purchases.


What is The Fed?

The Fed is the central bank of the U.S. whose objectives are to maximize employment, stabilize prices, and moderate long term interest rates. They have expanded to overseeing the nation’s monetary policy (raising or lowering interest rates), supervising and regulating banking institutions, maintaining the stability of the financial system, and providing financial services to depository institutions, the U.S, government and foreign official institutions.

Who Makes Up The Fed?

The Fed consists of a Board of Governors, twelve regional Federal Reserve Banks, the Federal Open Market Committee. The FOMC is responsible for setting monetary policy and consists of the seven Board of Governors and the twelve regional bank presidents, and privately owned U.S. banks as well as various advisory councils. The Fed also conducts its own economic research.

Where Does The Fed Get Its Authority?

The Fed’s authority comes from Congress and it’s subject to congressional oversight. The members of the Board of Governors, including its chairman (Ben Bernanke) and vice-chairman, are chosen by the President and confirmed by the Senate. Nationally chartered commercial banks are required to hold stock in the Federal Reserve Bank of their region, which entitles them to elect some members of the board of the regional Federal Reserve Bank.

Fed During The Great Recession

The Fed has “stimulated” the economy in three ways since the Great Recession. They provided lines of credit to financial and lending institutions. This cash infusion in turn, provided funds for consumer loans, which subsequently led to consumer buying. They engaged in quantitative easing, buying a significant amount of mortgages with the idea that the money would be used to buy mortgage debt and government bonds stimulating spending, reducing long-term interest rates and firing up the stock market. In 2011, the Fed enacted “Operation Twist” designed to make borrowing cheaper for businesses and consumers with the Fed selling short-term U.S. debt to buy long-term U.S. debt. They also began earmarking funds to buy bonds.

Decision Not To Taper

In its statement, the Fed said it would await evidence of a more stable economy before adjusting the pace of its purchases, expressing concerns of a sudden increase in borrowing costs undermining the economy. It even downgraded its forecast of the economy to 2 percent growth which many analysts predict will be the “new normal” for a stagnant economy and labor force though Bernanke did note improvement in the labor market.

Reinforced FFR

More important than even the decision not to taper its bond purchases was the reinforcement of the federal funds rate (rate at which banks can borrow from one another). The .25% rate will remain constant while unemployment remains above 6.5% and after inflation reaches 2%.

Forward Guidance

The Fed is providing forward guidance in its decision not to taper its bond purchases nor cut the federal funds rate. The Fed has been forthright in its handling of the economy through the recession. While we are in a still admittedly fragile market, rates have been naturally increasing when looking at the five and ten year treasuries.
Disclaimer: Killing The Breeze is not a registered investment advisor or advisory service. It does not suggest which securities or currencies should be bought or sold. The employees or affiliates of Killing The Breeze may hold positions in the stocks, currencies or industries discussed here. There is a very high degree of risk involved in the market. Killing The Breeze assumes no responsibility or liability for any trading or investment results. All content posted is for educational purposes only and independent advice should be sought from a professional to confirm validity and accuracy of any claim made.

This information should only be a starting point for doing additional independent research in order to allow you to form your own opinion regarding trading decisions. You should ask the firm with which you deal about the terms and conditions of the specific securities which you are trading and associated obligations. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.



Kwaisi France

An 80's baby forged in the 90's and unleashed upon the world in the 21st century, Kwaisi France is a Baltimore raised Brooklyn resident.

You may also like...

28 Responses

  1. December 11, 2017


    […]we came across a cool web-site that you may well enjoy. Take a look when you want[…]

  2. December 14, 2017


    […]Every the moment in a even though we opt for blogs that we study. Listed beneath would be the most up-to-date sites that we choose […]

  3. December 15, 2017


    […]The info talked about within the article are a number of the top accessible […]

  4. December 16, 2017


    […]very handful of internet websites that occur to be detailed below, from our point of view are undoubtedly nicely worth checking out[…]

  5. December 18, 2017


    […]one of our visitors not long ago advised the following website[…]

  6. December 20, 2017


    […]the time to study or stop by the subject material or websites we have linked to below the[…]

  7. December 21, 2017


    […]usually posts some pretty interesting stuff like this. If you’re new to this site[…]

  8. December 21, 2017


    […]below you will come across the link to some websites that we believe you ought to visit[…]

  9. December 22, 2017


    […]we came across a cool web page that you simply may well delight in. Take a look when you want[…]

  10. December 22, 2017


    […]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[…]

  11. December 23, 2017


    […]Sites of interest we’ve a link to[…]

  12. December 23, 2017


    […]here are some links to internet sites that we link to due to the fact we assume they’re worth visiting[…]

  13. December 23, 2017


    […]The information talked about in the report are a few of the most beneficial available […]

  14. December 26, 2017


    […]always a large fan of linking to bloggers that I enjoy but really don’t get a whole lot of link enjoy from[…]

  15. December 27, 2017


    […]usually posts some really interesting stuff like this. If you’re new to this site[…]

  16. December 27, 2017


    […]very couple of internet sites that transpire to be in depth below, from our point of view are undoubtedly nicely worth checking out[…]

  17. December 29, 2017


    […]Wonderful story, reckoned we could combine some unrelated information, nevertheless actually really worth taking a appear, whoa did 1 learn about Mid East has got a lot more problerms as well […]

  18. December 31, 2017


    […]below you will discover the link to some sites that we feel you must visit[…]

  19. January 3, 2018


    […]Every as soon as inside a though we pick out blogs that we read. Listed below are the latest web sites that we choose […]

  20. January 6, 2018


    […]here are some hyperlinks to sites that we link to since we feel they may be worth visiting[…]

  21. January 6, 2018


    […]just beneath, are various entirely not related web pages to ours, even so, they are certainly worth going over[…]

  22. January 8, 2018


    […]The facts talked about within the article are a few of the very best offered […]

  23. January 9, 2018


    […]although web-sites we backlink to below are considerably not related to ours, we feel they may be essentially worth a go by means of, so possess a look[…]

  24. January 15, 2018


    […]Every when inside a although we select blogs that we study. Listed below would be the most up-to-date internet sites that we pick […]

  25. January 15, 2018


    […]Here are several of the sites we advise for our visitors[…]

  26. January 18, 2018


    […]always a major fan of linking to bloggers that I really like but do not get a good deal of link love from[…]

  27. January 18, 2018


    […]we came across a cool website that you could possibly love. Take a appear should you want[…]

  28. January 18, 2018


    […]one of our guests not long ago proposed the following website[…]

Leave a Reply