The Federal Reserve said on Wednesday the economy continues to recover but is still in need of support, offering no indication that it is planning to reduce its bond-buying stimulus at its next meeting in September.

The central bank said after a two-day meeting that it would keep buying $85 billion in mortgage and Treasury securities per month in its effort to strengthen an economy that it said was still challenged by federal budget-tightening. It also pointed to a recent run up in mortgage rates.

In our view, the Fed clearly did not intend to cause a major sea change with the earlier "tapering" remarks; rather, they simply wanted to make it look like QE would not be open-ended. Now the Fed is looking for any excuse it can to justify continuing the present level of QE (which was probably always its intent) -- and mortgage rates were a convenient justification to latch onto.

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