By Pin-Yu Liao
Fed plans on buying $300 billion for long-term treasuries and is also pumping $750 billion into mortgage-backed securities in hopes to keep the mortgage interest rate at low level. As a result, stock prices are reflected higher on the news today as well as the price of the bonds. The Dow Jones industrial average underwent an early loss and made a comeback with a 1.2% gain. The yield of 10-year Treasury note dropped. The rate is 0.3 percentage point lower on a 10-year and 30-year note.
It is reported that there are more job loss occurrences this year, the drop in values of stocks and bonds, and lesser consumer spending. After the news came out, there is an indication of inflation this Wednesday, and the Fed will carry out its plan to reach the potential inflation. The Fed asserted it "sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term." The Fed is worried about deflation, because the falling prices will suppress the output and employment which drives down the economy faster. On the other side, the consequences of Fed’s decision to buy treasuries and mortgage backed securities bring the dollar weak. The weaker value in dollar causes the Americans to pay higher prices for imported goods such as oil.
It is reported that there are more job loss occurrences this year, the drop in values of stocks and bonds, and lesser consumer spending. After the news came out, there is an indication of inflation this Wednesday, and the Fed will carry out its plan to reach the potential inflation. The Fed asserted it "sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term." The Fed is worried about deflation, because the falling prices will suppress the output and employment which drives down the economy faster. On the other side, the consequences of Fed’s decision to buy treasuries and mortgage backed securities bring the dollar weak. The weaker value in dollar causes the Americans to pay higher prices for imported goods such as oil.
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