Federal Reserve to Refrain from More Bond Buying

Two influential officials from the Federal Reserve announced on Friday that the central bank should wait before buying more bonds. In addition to cutting overnight interest rates down to nothing in December of 2008, the Federal Reserve also purchased $2.3 trillion worth of government and mortgage-related bonds to stimulate growth in response to the worst recession in dozens of years.

Economy Improving, Bond Buying Not Needed

The president of the Federal Reserve Bank in St. Louis, James Bullard told reporters after

James Bullard

a speech he gave in this Midwestern city that as long as the economy seems to be improving, the purchasing of more bonds should be postponed.

“The data has been stronger in recent weeks and months, and so I think there’s probably a good case to stand pat for now,” Bullard said.

“If the economy did deteriorate substantially in 2012, then I think (quantitative easing) would come back on the table, but that’s not where we are right now,” added Bullard, considered a centrist when it comes to policy debated by the Federal Reserve.

Upcoming Policy Meeting

The large variety of positions when it comes to Fed policy was apparent as the officials practiced their differing arguments in preparation for their upcoming policy meeting on January 24-25.

The aftermath of the meeting is expected to result in the announcement of more information about the direction interest rates will take in the near future, as well as an explicit number for an inflation target. It is not expected, however that the Feds will announce any new round of bond purchases.

Bond Buying on Hold, For Now

Some other Federal Reserve officials, including the influential president of the New York Fed, have hinted recently that additional bond buys might need to be considered sometime in the future, but for now Bullard’s position is probably the one which will be followed for now.

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About Alison Meadows

Alison Meadows has a PHD in Economic Trends in Modern Times and is a known writer who focuses on hedge fund investments. Meadows, her husband, and three kids live in Boston, where she grew up and attended college. Contact Alison at alison[at]businessdistrict.com