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The Federal Reserve on Thursday, in an effort to target stubbornly high unemployment, offered an array of apparently open-ended stimulus programs designed to keep interest rates low until an economic recovery gains significant traction.
The Fed announced a program of mortgage backed securities purchases valued at $40 billion each month. The Fed also said it would extend Operation Twist, a program initiated a year ago designed to shift the central bank’s portfolio toward long-term assets.
“the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.”
“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.“
The U.S. Treasury Department sold $13 billion of 30-year bonds earlier in the day, in what analysts said was a strong auction.
In an additional move that reflects just how concerned they are about the economy, Fed officials said they were unlikely to raise interest rates from current rock-bottom lows until at least mid-2015, compared with previous guidance of late 2014.
The FOMC "emphasized that it expects a highly accommodative stance on monetary policy to remain appropriate for a considerable time after the economic recovery strengthens," Fed Chairman Ben Bernanke said on Thursday after the announcement.
The latest figures on U.S. jobless claims and producer prices did not cause much market reaction earlier in the day. The data largely reinforced the view of low employment growth and inflation.
First-time filings for jobless benefits totaled 382,000 last week, higher than what economists had forecast. The Labor Department blamed the larger-than-expected weekly increase on Tropical Storm Isaac.
At the same time, the agency said producer prices rose 1.7 percent in August, the biggest monthly increase since June 2009. But the core rate, which excludes volatile energy and food prices, grew 0.2 percent, in line with estimates.
Before the Open (Sep 19)
by admin on September 19, 2012
in Before the Open
The Bank of Japan is joining the US Fed and the ECB…it will debase its currency and buy assets. It’s a race to the bottom for world currencies.
The Bank of England voted 9-0 to keep its asset purchase program and headline interest rates unchanged. - More
September 19, 2012
Premarket: Stocks set to break losing streak, thanks to Japan's QE
Another central bank has come to the rescue with a further dose of quantitative easing, paving the way for North American stocks to open higher after two straight days of modest losses.
This time, it's the Bank of Japan, announcing overnight it would increase the size of its asset purchase program by ¥10-trillion, or $126.7-billion (U.S.), to a total of about ¥80-billion. Further monetary stimulus by the bank wasn't completely unexpected, but the size of the program took traders off guard. - Continue