Fallout: The Financial Crisis

Fed might stop the money pump

Jeremy Hobson Jun 24, 2009
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Fallout: The Financial Crisis

Fed might stop the money pump

Jeremy Hobson Jun 24, 2009
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TEXT OF STORY

Steve Chiotakis: Federal Reserve policy makers wrap up their latest two-day meeting this afternoon. That means more forecasts from the people with access to information the rest of us can’t see.
Here’s Marketplace’s Jeremy Hobson.


Jeremy Hobson: The Fed has been pumping money into the economy since the beginning of the financial crisis. But As recently as April, the Federal Open Market Committee said inflation should remain subdued because of the global slump.

But since then, the government has had to offer higher interest rates to sell its debt, and talk of inflation has escalated. So some analysts are predicting the Fed will at least stop flooding the system with more money.

That could mean rolling back some of the credit-easing programs out there. Like the ones that use the Fed’s printing press to purchase government bonds and mortgage-backed securities.

Of course, a roll-back could send mortgage rates higher and slow the housing market recovery. In the meantime, the Fed is expected to keep its key bank lending rate at near zero percent.

In New York, I’m Jeremy Hobson for Marketplace.

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