The U.S. Federal Reserve kicked off their two-day policy meeting on Tuesday and is expected to announce tomorrow that they will end the latest round of monetary stimulus, also known as quantitative easing. However some analysts think the Fed will keep its low interest rates until the economy is on more stable footing. CCTV America’s Daniel Ryntjes reports.
The Fed expected to end quantitative easingThe U.S. Federal Reserve kicked off their two-day policy meeting on Tuesday and is expected to announce tomorrow that they will end the latest round of monetary stimulus, also known as quantitative easing. However some analysts think the Fed will keep its low interest rates until the economy is on more stable footing. CCTV America's Daniel Ryntjes reports.
The formula was simple, the U.S. Federal Reserve would pump $85 billion a month into the U.S. banking system until the country’s unemployment rate fell below 6.5 percent.
With unemployment dipping below 6 percent for the first time in more than six years, there are reasons for optimism which could spell the end to America’s grand experiment in economic stimulus.
“I think there are a lot of businesses that are going to be getting stronger next year. I think employment will keep growing even more rapidly. As a result, I think firms are going to start raising compensation,” said Kenneth Simonson, the chief economist for the Associated General Contractors of America.
However an end to quantitative easing next month isn’t a sure thing. The chair of the Federal Reserve, Janet Yellen, doesn’t think the unemployment rate tells the whole story, and she’s not alone.
“There are still a lot of people who haven’t got a job at all, or they are working fewer hours than they want, or they’re not working in the kind of field they have training and experience for. So there are a lot of mis-matches in this economy,” Simonson added.
The Federal Reserve purchased around $1.6 trillion in U.S. assets over the last two years with the goal of encouraging lower borrowing costs and more risk-taking in the business community. However, small businesses, which make up almost half of all private sector jobs, struggled to benefit from the low rates.
Community business advisor and lender, Karlene Sinclair-Robinson, said the banks have been turning small businesses away.
“If they were to do the smaller loan to business owners, the economy would recover a whole lot faster, but of course they want a larger return now,” she said.
The Federal Reserve’s efforts are also translating to gains in other parts of the economy. U.S. consumers’ confidence rose to its highest level since October 2007, according to a private sector report by the Conference Board. For more on this issue, CCTV America’s Michelle Makori interviewed Lynn Franco, the director of economic indicators and surveys at The Conference Board.