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FOMC Monetary Policy Updates


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So far this week has been an eventful one for Wall Street and FOMC. During the latter’s meeting on Tuesday both Chairman Bernanke and Yellen made comments on the fate of the much talked about monetary policy and what may possibly be the plan of action in the months to come. Following a speech given by his successor, Bernanke stated the monetary policy will remain lax and bond tapering will only begin once the FOMC deems the economy stable and improving. We’ll take a look at what else was covered during the meeting and predict how Chairman Yellen will assume the Bernanke’s position.

(photo credit to: Wikipedia.com)

(photo credit to: Wikipedia.com)

Though Bernanke admits that the economy was improving, significant progress still needed to be made. He goes on to say how the FOMC will continue to accommodate policies as long as they are needed. Both Yellen and Bernanke share common ground in their idea that the best approach to monetary policy is to endorse a demanded recovery.

As an idea, President Obama nominated Janet Yellen who is the current vice chair to succeed Bernanke at the end of his term on January 31st. Though she hasn’t officially received the position, the Senate Banking Committee will hold a vote on her nomination today to pass it to the Senate for full consideration. Even with that said, she’s expected to win the seat without any trouble.

Since late 2008 interest rates have remained near zero as the Fed quadrupled it’s balance sheet to a whopping $3.9 trillion. This was all within three large rounds of bond buying. As a monetary policy update, Bernanke feels that it is likely to not see a taper until some time in spring of next year. At a maintained purchases at $85 billion per month, officials want evidence of job growth before they begin scaling it back.

Unfortunately, all Yellen and Bernanke did was reinforce the statements that have been previously voiced during past FOMC meetings. Still, it’s reassuring to know that the Fed will not commence any scaling back until the economy is back on its feet. Hopefully it will happen before the balance sheet doubles. It’s unlikely that we’ll see any progress on the bond tapering at the next FOMC meeting set for December 17-18. Most economists predict that this monetary policy update won’t come into play until January or even March.

So with Yellen nearing the beginning of her term and Bernanke on his way out, what can we expect with the FOMC meetings and monetary policy updates? Will the taper commence earlier in the year or will the date continue to be pushed back? Also, after Bernanke’s recent comments about Bitcoin what can we expect for it’s use in the long-term?

What are your thoughts about the recent monetary policy updates and what Yellen and Bernanke has stated? When do you think we’re ready to begin a taper?

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