US Fed to proceed with QE2

| January 5, 2011 | 1 Comment

Minutes from the December 14 policy meeting have revealed that US central bank, the Federal Reserve, will press ahead with its $600 billion (£385 billion) stimulus programme.

The fresh round of stimulus comes despite improvements in the world’s largest economy, the minutes revealed.

Many economists suggested that the strengthening recovery would result in the Fed scaling back the QE2 programme.

However, the Fed noted that the housing market remains weak and unemployment remains stubbornly high - at almost 10% and this is having a negative impact on household spending.

The notes said: “There were indications that retail spending by middle and lower-income households had risen less than spending by high-income households, suggestive of ongoing financial pressures on those of more modest means.”

The QE2 programme, meanwhile, was widely criticised by several other nations, including Germany, China and South Africa, when it was first announced by the Fed.

Germany described the US monetary policy as “clueless” and said they would create “extra problems for the world”, while Brazil said the fresh round of stimulus would not boost production or create jobs in the US, but would instead drive money into countries with higher interest rates and cause inflation.

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  1. Lorne Marr says:

    It’s no surprise that they didn’t give up the QE2. A lot of banks are counting on it and the U.S. economy just needs it. The housing market is still plummeting with prices going down and expectations are for gradual decrease of about 20% till they hit the bottom. In this kind of situation, where a total collapse of the financial system that is still very strongly linked to the housing market is a serious threat, the FED won’t listen to countries abroad.

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