Federal Reserve Continues Quantitative Easing

The Federal Reserve today released the minutes from the March 15 meeting of the Federal Open Market Committee (FOMC).  The FOMC is the part of the Federal Reserve that oversees the purchase and sale of U.S. Treasury securities, which is the Federal Reserve’s principal tool for implementing monetary policy.

Since the beginning of our current financial crisis, the Federal Reserve has been taking unprecedented actions to try to stimulate the economy, such as lowering interest rates more or less to 0% (actually from 0% to 0.25%), and buying billions of dollars in U.S. Treasury bonds, in order to pour more money into the economy.  The minutes of this most recent meeting show that the Federal Reserve has no plans yet to roll back these policies.

The members of the FOMC discussed the fact that while unemployment seemed to be improving over the few months prior to the meeting, it was improving very gradually, and unemployment was still high.

The other big concern was inflation, especially given the recent spike in oil prices and other commodities.  While this worried some members of the committee, in the end they agreed that inflation caused by these increased commodity prices was probably transitory, though they added that they will carefully monitor the situation.

They also noted that business investment and consumer spending were up during the period between meetings (from January 26 to March 15), which of course are good signs for the economy.

Though there were signs that the recovery was on a “firmer footing” since their last meeting, it was still decided in the end that the recovery was too precarious to risk either raising interest rates or to stop their asset purchase program, as these program would “promote a stronger pace of economic recovery.”