In a bit of a surprise move, the Federal Reserve has announced the end of their recent bond-buying program. It kept interest rates low in an effort to stimulate the economy and the time has come, apparently, to bring it an end.
In its policy statement, the Fed said:
“There has been a substantial improvement in the outlook for the labor market since the inception of [the] current asset-purchase program. Moreover, the [Fed] continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability.”
“However, if incoming information indicates faster progress toward the committee’s employment and inflation objectives than the committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.”
FED Main
Supporters of the bond-buying program cessation indicate that the six years and approximately $4 trillion in bond purchases have helped to restore the economy to a place of stability. Fed officials parted after two days of meetings and discussions, giving their best assessment of the labor market in a very long time. They cite that job gains have been solid and consistent and that the unemployment rate is dropping faster than they expected.
But the cessation has not been met with full approval. Several dissenters made it quite clear that they do not agree with the timing of the call to end the program. The dissenters suggest that even though the program has helped, it has not been enough to show a good reason for stopping. Basically, they have an “if-it-aint-broke” mentality that requires more time to determine the lasting effects of the program.