US Fed hints at fresh round of quantitative easing

| October 17, 2010 | 0 Comments
US Fed hints at fresh round of quantitative easing

US central bank, the Federal Reserve, has hinted it will take measures to stimulate the economy by way of buying up US Government bonds in order to lower borrowing costs.

The fresh round of stimulus comes as the world’s largest economy is struggling with a sluggish recovery, low inflation and high unemployment.

Furthermore, growth in the world’s largest economy has experienced a major slowdown in the second quarter of 2010.

The next meeting of the Federal Open Market Committee, which sets interest rates and the level of quantitative easing, will take place on 2-3 November, when the Fed is expected to give details of its fresh injection of capital.

In a speech to the Boston Regional Federal Reserve, US Fed Chairman Ben Bernanke, said: “There would appear, all else being equal, to be a case for further action.”

However, according to experts, buying up US Government bonds will weaken the dollar, fuelling further tensions with China over its undervalued yuan.

In other news, US Congress has estimated that the US budget deficit fell to $1.3 trillion (£813 billion) in the 12 months to the end of September.

The deficit represents 8.9% of GDP - the highest since the end of the Second World War.

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