Fed Cuts Back on Quantitative Easing Again

The FOMC tapers QE by another $10 billion per month, but keeps federal funds target rate at near-zero levels.

Jan 29, 2014 at 3:42PM

The Federal Open Market Committee (FOMC) announced today that it will cut back again on quantitative easing (paring an additional $10 billion in bond purchases per month) as the economy slowly strengthens, but will keep the federal funds target range between 0% and 0.25%. 

The federal funds rate is the interest rate at which large financial institutions lend and borrow money from their balances with the Federal Reserve, which affects the interest rates for all loans. By keeping the federal funds rate low, the Federal Reserve aims to promote borrowing money and discourage saving it, a recipe for increased economic activity.

Analysts had expected the target range to remain steady at next to nothing, but the decision to taper off mortgage-backed and Treasury securities was less set in stone. According to the announcement, the "cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions" pushed the Committee to its newest tapering resolution, which will put the Fed's bond buying at $65 billion per month.

This latest move mimics the Committee's December decision as it chips another $5 billion off both mortgage-backed and Treasury securities, putting monthly purchases at $30 billion and $35 billion, respectively.

Looking ahead, the Fed reiterated that a "highly accommodative" policy will remain appropriate for a "considerable time," even after the recovery improves and quantitative easing ends.

It also affirmed that it doesn't expect to increase interest rates until the unemployment rate drops below 6.5%, and perhaps not even then, depending on other economic considerations. The current unemployment rate stands at 6.7%.


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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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