The conclusion of the Federal Open Market Committee (FOMC) meeting on Wednesday, October 24 yielded a statement that the Fed would continue its economic stimulus efforts even as new housing data showed promise of a strengthening recovery.
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The Fed also acknowledged that consumer spending was strengthening but it still thinks accommodative efforts are needed, indicating little confidence the recovery could strengthen sufficiently on its own.
The Fed also stands ready to expand its stimulus efforts if it the labor market outlook does not improve substantially.
So far, the Fed’s goal has been to bolster the housing market by purchasing mortgage bonds each month in hopes of keeping interest rates low and encouraging new buyers.
Housing is anchored to employment and the Fed has committed to doing whatever is necessary to create new jobs and keep interest rates low to fuel the housing market.
As long as inflation remains tame, the Fed appears to be ready to push its agenda to the limit.
But several Fed officials worry that the new accommodative policy will be less effective if clear levels of unemployment or economic output are not targeted.
So far, it’s been difficult establishing a consensus for what constitutes an appropriate target. The Fed meets for the last time this year on December 11 and 12.