Fed to buy government bonds by Milota Sidorova

Some analysts said that the reason why Democrats lost past days in Congressional elections was the unemployment. And it is more than considerable that this word is moving policies, public opinions and financial markets. In order to „boost“ the economy that consists also of this unemployment factor, Federal Reserve has announced it would buy $600 billion of government bonds. Fed suggests that it should keep lower interest rates and increase the number of job positions. But at the same time there is no complete agreement even inside Fed. Athough the step to invest into government bonds was agreed on Wednesday by majority of the board, Thomas Hoenig, president of t! he Federal Reserve Bank of Kansas City anticipated the move that was according to him „too risky“. The general plan or projection is that Fed is going to buy bonds at a rate of about $75 billion a month until the middle of 2011. The move should be reflected by easier to get loans for banks and businesses. But there is no guarantee that it will really force people to spend more money – since long term projections suggest people have been unwilling to buy and spend more past months and that Fed has already done a chain of „economy boosting“ steps. So far, not a big change. Hoenig is not the only one who is fearing Fed is going to increase inflation istead of the economy. The possible scenario is that Fed is going to flood the economy with hundreds of billions of dollars that were immediatelly printed and it will lower the value of dollar. The green paper has been already on the way down. Fed's chairman however said those „fears were overblo! wn“. Markets reacted with slight growth with Dow Jones I! ndustria l finishing up 26 points about 0.25 percent point at 11,215.13.

related story (sgx18533): http://news.yahoo.com/s/ap/us_federal_reserve;_ylt=Aokpwh8.Z...

by Milota Sidorova for Cantell TV (http://cantell.tv)

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