Wednesday, the Fed announced that interest rates would remain at zero to 0.25% for at least the next six months.
The Fed statement read as follows: "weak conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The only change in the Fed's policy was a tweak in the amount of corporate debt that the Fed intends to buy.
You are probably wondering why the Fed is doing this. Apparently the Fed sees the economy as fragile, even in light of the recent stock rally. The Fed said that they are looking at many unused factories and unemployed workers. The Fed statement went on to say: "Businesses are still cutting back on fixed investment and staffing, though at a slower pace."
Now the critics of the Fed's loose money policy argue that it will cause inflation and excessive speculation in commodities and is on track for a weaker dollar vs. other world currencies. Apparently the Fed is willing to risk a weaker dollar and maintain its loose money policy. For example, speculation has hit the oil market, where crude is trading about $80 per barrel, up 60% for the year. Gold is trading around $1,092 per ounce. Investor Jim Rodgers is predicting that gold prices will rise to $2,000 per ounce. The U.S. dollar has fallen $15 against a basket of major foreign currencies since early March.
Whether the Fed is playing Russian roulette with the U.S. economy remains to be seen. The wheel may spin to 0, who knows.
Should the Fed raise interest rates now?
Entrepreneur's Journal: Want to get a piece of the Buffett/Goldman honeypot?
The week in preview: No turkey earnings from Tyson, Hormel, Cracker Barrel ...
Comfort Zone Investing: Intel is saying something ... can you hear it?
Reader Comments (Page 1 of 1)
11-05-2009 @ 2:31PM
clikdawg said...
"Will the Fed's loose money policy be successful?"
For whom?
(Sorry for the multitude of postings from me today -- going on a long, long vacation tomorrow and jes' scratchin' dat itch 'fore I go ... )