The U.S Federal Reserve has announced some major policy initiatives in order to improve the high unemployment rate in the country and to stabilize the inflation in the economy. According to the program, the Federal Reserve would purchase mortgage-backed securities amounting to…
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Bernanke, Chairman of the Federal Reserve, this move would urge the people to spend more in buying commodities, investments and exports. The Federal Reserve has given its commitment to this program until the job market scenario in the US improves. This move has resulted in heavy investments in the stock market, gold and other such assets and the Dow Jones average for industries reached a new high after a similar rise in 2007. However, this announcement has resulted in a price hike for basic commodities such as oil that has created unease among the people who fear an impending rise in basic essentials.
Though the present program is considerably less compared to the $1.25 trillion and $600 billion bond-buying programs which were launched in 2009 and 2010 respectively, the Federal Reserve has further announced that the current program could be extended to buy agency-mortgage securities and other assets if no major improvement is seen in the job market. Though this move has been criticized as being less aggressive by academics and economists, the central bank chairman has argued that the Federal Reserve is doing its best to stimulate the economy and also the present program could be further extended if and when required. The Federal Reserve has mainly aimed its program on those who have been out of employment and are in need of economic security until they find employment. In his address to the media, Mr. Bernanke noted that the longer people are out of work the harder it is to find another job as their work experience is at stake. The central bank has also announced that it would continue its Operation Twist program through which it would buy treasury bonds amounting to $45 billion every month which will be used to fund the mortgage purchases. And if the economic situation does not improve significantly it has proposed to purchase treasury bonds through money printing in addition to purchasing mortgages. In addition it also plans to keep short-term
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