Midday Report: Fed to Wind Down Stimulus Program, but When?

×
The Fed prepares to end a controversial program, and its next move could have major implications for investors.

The Federal Reserve's bond-buying program has been one of the main drivers behind the market rally over the past nine months. The Wall Street Journal reports the central bank has now decided what to do next, but the timing is still up in the air.

The Fed has been buying $85 billion worth of bonds each and every month since September. The intent has been to boost the economy and encourage new borrowing and spending by businesses and individuals, which would hopefully lead to more hiring.

What the Fed wants to do next is start to unwind the program, but not all at once. The Journal says that officials want to make a gradual exit, in order to maintain lots of flexibility so that they can adjust to ups and downs of the economy.

WASHINGTON, DC - APRIL 25: Treasury Secretary Jack Lew (R) speaks with Federal Reserve Chairman Ben Bernanke during an open session of the Financial Stability Oversight Council at the Treasury Department, April 25, 2013 in Washington, DC. The session was held to discuss the financial markets and emerging threats to financial stability, and make relevant recommendations. (Photo by Mark Wilson/Getty Images)
Getty Images
Fed Chairman Ben Bernanke has previously indicated he wants to avoid a mistake that has been made on other occasions, when the Fed halted stimulus programs too quickly or too abruptly. So the new plan is designed to wean the economy from the support it's been getting, and to give the Fed the ability to react more quickly to changes in the economy – and perhaps the markets too. The central bank wants to manage market expectations to avoid overreactions.

Some Fed officials say the economy is strong enough right now to begin withdrawing that stimulus as soon as this summer. Others support the idea of gradually doing so, but say the time is not yet right. They want to wait until the evidence is clear that economic growth is firmly on track.

A number of Fed officials give public speeches this week that could give a better indication about the timing, including Bernanke. He will discuss the long-term prospects for the economy when he gives the commencement address at Bard College on Saturday.

Fed policymakers meet again in June, July and September.

-Produced by Drew Trachtenberg


Increase your money and finance knowledge from home

Small Cap Investing

Learn now to invest in small companies the right way.

View Course »

Introduction to Value Investing

Are you the next Warren Buffett?

View Course »

Add a Comment

*0 / 3000 Character Maximum

24 Comments

Filter by:
Cromleigh's

liberals are terrible it sickens me to look out my window because i am guessing all my neighbors are liberal there kids steal my flowers and give them to there parents and then they complain to me cause there child got stabbed by the thorns on my rose bushes

May 29 2013 at 12:35 AM Report abuse rate up rate down Reply
rrusrjr2

It is hilarious when liberals give credit to Obama for the current economy. Fake money, ultra low interest rates, and down the road problems are somebody else's responsibility. Growth under 2% is not a healthy economy, lefties.

May 27 2013 at 8:51 AM Report abuse rate up rate down Reply
shalebrook

What stimulus program????? Sorry, President Obama, most of the Private Sector missed it.

May 15 2013 at 8:39 AM Report abuse -1 rate up rate down Reply
ZMAN

Who are they kidding. The fed is the only thing keeping this economy afloat and nothing will change until democrats loose the white house. The only thing that might change that is if the dollar crashes sooner rather than later. Either way we are screwed.

May 14 2013 at 11:58 AM Report abuse rate up rate down Reply
moretrorun

They realize the talk hasn't worked. If they raise interest rates, they'll lose money. If they get out first before the normal investor, they leave themselves open to scrutiny. Yet it is the only thing and the best thing to do. They've got themselves into a corner. So they talk in circles. But they'll go slowly, so they say. We're watching.

May 14 2013 at 11:08 AM Report abuse rate up rate down Reply
Jim

Too little too late

May 14 2013 at 10:43 AM Report abuse rate up rate down Reply
Jim

Too little too late

May 14 2013 at 10:43 AM Report abuse rate up rate down Reply
Bill

Of course they are not going to disclose "when" or "how gradual". That may be seen as insider information.

May 14 2013 at 9:42 AM Report abuse +1 rate up rate down Reply
scottee

The Fed needs to increase interest rates. we need to be a country of savers...not debtors.

May 14 2013 at 8:37 AM Report abuse rate up rate down Reply
Scott Fourhman

it will end when the democrats lose the white house and not a day before wow even I knew that

May 14 2013 at 8:34 AM Report abuse -2 rate up rate down Reply
2 replies to Scott Fourhman's comment
scottee

I am a fiscal conservative and Bush mucked things up also. both parties are the same elite club and we keep re-electing most of them...why? how stupid are we?

May 14 2013 at 8:38 AM Report abuse -1 rate up rate down Reply
bchrist751

Obama is the stumping block to economic recovery.

May 14 2013 at 9:07 AM Report abuse rate up rate down Reply