Federal Reserve to announce possible monetary policy changes
Federal Reserve Board Chairman Ben Bernanke looks on during a dinner at the Federal Reserve Building in Washington, D.C.
Jeff Horwich: The U.S. Federal Reserve Open Market Committee finishes two days of meetings today. And we'll have an announcement shortly on what -- if any -- change in monetary policy they might have decided on.
For more, we're joined by Marketplace's New York bureau chief Heidi Moore. Hello Heidi.
Heidi Moore: Hey, Jeff.
Horwich: So, the Fed -- what are their options?
Moore: Sure, well some people are worried whether they have any options. I talked to Burt Ely. He’s an economist in Virginia. And here’s how he put it.
Burt Ely: The Fed may be able to bring down longer term interest rates a little bit lower. But they’re already at record lows. It’s out of bold moves.
Moore: And so that might be a little bit extreme; the Fed does have some options. They can do a very subtle move, which is just say “we’re going to keep interest rates really low for a long time.” Or they can do something really bold, which is they can buy up treasury bonds or mortgage securities. They call that “Quantitative Easing.”
Horwich: And how long can the Fed keep these low rates.
Moore: It’s already promised until mid-2014, and they could extend that even to 2015, or as long as they think the market needs to feel secure that companies and banks can get access to financing.
Horwich: So for however long interest rates are low, who does that help and who does that hurt?
Moore: Well we can start with who it hurts, and that’s you and me and anybody else with money in a savings account. I hope I’m not assuming too much about our savings accounts, but we expect a certain level of interest from them, and we have been getting zero for several years now. Retirees who live on interest aren’t getting anything. But the people who it’s helping are companies and banks, they have access to bonds, we know that they will, and so this helps basically prevent a Lehman moment, and that’s where we want to be with something like this, because Lehman was pretty drastic.
Horwich: Heidi Moore, thanks very much.
Moore: Thank you.