Magazine article Economic Trends

A Focus on Quantitative Easing

Magazine article Economic Trends

A Focus on Quantitative Easing

Article excerpt

01.12.09

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In an unprecedented move at its December 16 meeting, the Federal Open Market Committee (FOMC) decided to establish a target range for the federal funds rate of 0 to 1/4 percent. The Board of Governors also reduced the primary credit rate to 1/2 percent.

Recognizing that interest rate policy reductions had essentially reached a zero bound, the Committee stressed that the "Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability." Further, the Committee stated that the focus of "policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level."

Open market operations and other measures have added greatly to the supply of the monetary base, which jumped from around $850 billion in late August to nearly $1. …

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