The Federal Reserve is unleashing more stimulus in its attempt to boost the U.S. economy.
The bank announced it is buying $40 billion in mortgage-backed securities each month. The end date remains up in the air, as the Fed will re-evaluate the strength of the economy in coming months.
The purchases began today (Sept. 14) and expected to be $23 billion for the remainder of September according to CNN.
QE stands for Quantitative Easing. The definition of Easing is trying to bring interest rates down, particularly long term rates.
The way they’re going about this is the Federal Reserve made the decision to purchase for an indefinite period mortgage-backed securities totaling $40 billion every month.
They’re going to start immediately and the hope is that the markets will react positively.
What markets are those?
If you’re a saver, in regards to the banks, interest rates are expected to be lower for Certificates of Deposit (CD’s). If you’re a borrow and you want to purchase something such as a home, the mortgage rates are most likely going to come down.
None of this is ever known for sure but that is what’s being sought by the Federal Reserve with their Quantitative Easing.
What makes this decision different than all other Federal Reserve decisions is usually they announce they’re going to purchase a definite amount of securities. This decision makes history because the purchase of mortgage-backed securities will go on indefinitely.
The views expressed are by Sheldon Harber and should not be considered legal or tax advice. Please see a qualified attorney or accountant for answers to specific questions.
Investors should carefully consider the investment objectives, risks, fees and expenses before investing. For this and other important information please obtain the investment company fund prospectus and disclosure documents from your Rep/Advisor. Read this information carefully before investing. Diversification and asset allocation strategies do not assure profit or protect against loss.
Be sure to also follow us at these sites:
mortgages, federal reserve, mortgage-backed securities, QE3,
quantitative easing 3, housing market, US economy